Microeconomics Mcconnell Brue Flyn 18Th Chptr 7

Front 1

1.Are the terms ‘utility” and “usefulness” the same from the economist’s point of view?

Back 1

P135
Utility is want –satisfying power
Usefulness-

Front 2

2.How is utility determined?

Back 2

P135
is want-satisfying power
can be determined or measured by the satifaction it provides.

example a pair of eyeglasses have tremendous utility for someone who has poor eyesight but no utility for someone with perfect eyesight

Front 3

3.What is marginal utility? Diminishing marginal utility?

Back 3

P135,137
Marginal utility-is the extra satisfaction a consumer realizes from an additional unit of that product.
dimishing marginal utility- price must decrease in order for quantity demand to increase.

Front 4

4.What is total utility?

Back 4

P 135
Is the total amount of satisfaction or pleasure a person derives from consuming some specific quanitity.

Front 5

How do you know when maximum total utility has been reached?

Back 5

p

When the additional marginal units no longer provide satisfaction.

Front 6

How do economists define “rational behavior”?

Back 6

P 137
someome who tries to use their money to derive the greatest amount of satisfaction, or utility, from it.

Front 7

How does budget constraint influence consumer behavior?

Back 7

P137

at any point iin time a consumer has a fixed or limited amount of income and this constrained limits the ammount of goods a consumer can purchase.

Front 8

How does price influence consumer behavior?

Back 8

P 137
Price affects how many they can buy.

Front 9

What is the utility-maximizing rule?

Back 9

P 138
Theoretical, to maximize satisfaction, the consumer should allocate their money income so that the last dollar spent on each product yeilds the same amount of extra marginal utility.

Front 10

What does the concept of marginal utility per dollar imply?

Back 10

P138
the customer comparing the the extra utils from each product and its added cost.

Front 11

How do the “income effect” and the “substitution effect” influence consumer behavior?

Back 11

P 140
The more you know about substitutes the better off you are. The substitution effect allows for purchasing more product as the price of one drops compare to a another item. This allows the puchase of a substitute for the item at a better price. Income also allows greater satisfaction as th eprice drops.

Front 12

Explain the significance of the diamond-water paradox.

Back 12

P 142
water has much more total utility(roughly, usefulness) than diamond even though the price of diamonds greatlt exceed the price of water.

Front 13

How does time influence consumer behavior?

Back 13

P 143
Time equate to money, depending on the amount of time you have and your potential earning capability have an affect on what and how you may choose to spend your time.

Front 14

How does the concept of marginal utility influence medical care choices or where you decide to eat dinner?

Back 14

P144

Front 15

Using the concept of marginal utility, explain why people typically favor cash gifts over non-cash gifts.

Back 15

P144
Cash meets your need.