Karteikarten
The Consumer 1
Karten in diesem Stapel (13)
- 1ConsumerAn individual who makes the decision to buy a good or service
- 2UtilityThe amount of benefit or satisfaction derived from the consumption of a good
- 3Assumptions about the consumer1. They'll have a limited income
2. They seek to get maximum utility from that income
3.They will act rationally.
4. They are subject to the law of Diminishing Utility. - 4Marginal UtilityThe addition to total utility (TU) brought about by the extra utility received by the consumption of one extra unit
- 5The Law of Diminishing Marginal UtilityAs more units of a good are consumed a point will be reached where marginal utility will eventually begin to decline
- 6Assumptions underlying the Law of Diminishing Marginal Utility1. Only applies after a certain minimum has been reached.
2.Sufficient time has not elapsed for circumstances to change.
3.Income doesn't change.
4.It does not apply to medicine or addictive goods. - 7Commodities that do not apply with the Law of Diminishing Marginal Utility1. Medicine : each dose may be as important as the first one so marginal utility does not decline
2.Addictive Goods : each extra unit provides an increase in marginal utility constanly - 8IncomeThe flow of wealth received by an individual over a period of time
- 9Economic GoodA good that requires a price, derives utility and can be transported
- 10EquilibriumA state where there is no tendancy to change
- 11The Equi-marginal PrincipleExplains the behavior of a consumer in distributing their limited income so that the ratio of marginal utility to price is equal
- 12Formula for Equi-marginal PrincipleMUx/Px =MUy/ Py
- 13—
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- Beschreibung
- Definitions on the chapter
- Erstellt von
- hayley fuentes
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