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ECON 1000 Lecture Notes - Demand Curve, Bounded Rationality, Prefrontal Cortex

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chocolatebee65
10 Dec 2018
School
York University
Department
Economics
Course
ECON 1000
Professor
TBA

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ECON 1000 Full Course Notes
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Document Summary

Consumption possibilities: things that you can afford to buy. Budget line: shows the limits of her consumption possibilities. You can afford anything on the line of inside but nothing outside. Total utility: the total benefit a person gets from the consumption of goods. Marginal utility: from a good is the change in total utility that results from a unit-increase in the quantity good consumed. As the quantity consumed of a good increases, marginal utility decreases. This decrease in marginal utility as the quantity of good consumed increases the principle of diminishing marginal utility. For ex: as the # of movies lisa watches a month increases, the marginal utility of movies decreases. To find the utility-maximizing choice use a chart. Consumer equilibrium: situation where the person has allocated all their available income in a way that it maximizes their total utility. Marginal utility: is the increase in total utility that results from consuming one more unit of the good.

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Related Questions

COMPLETE EACH OF THE FOLLOWING SENTENCES [CONCEPT: LAW OF DIMINISHING MARGINAL UTILITY] 

(i) Your tastes determine the ............ you derive from consuming a particular good.

(ii) .........utility in the change in ............utility resulting from the change in the consumption of good.

(iii) As long as marginal utility is positive, total utility is ...........

(iv) The law of diminishing marginal utility states that as an individual consumes more of a good during a given period, other things constant,total utility .............

1. Economists use ____________ as a measure of the relative level of satisfaction when someone consumes a good or service.

  consumer happiness
  utility
  a happiness index
  a satisfaction index

2. Sue likes brownies. However, Sue notices that the more brownies she eats the less satisfaction she receives from each extra brownie. We can say that Sue is experiencing ___________________ from each extra brownie.

  sugar sickness
  total utility
  diminishing marginal utility
  increasing marginal utility

3. When total utility is maximized, the marginal utility will be

  positive.
  zero.
  negative.
  none of these.

4. Consider Dirk and Lee. They are both eating pizza. Which of the following statements is true regarding their satisfaction and utility?

  Dirk and Lee both receive 10 utils from eating pizza.
  Dirk and Lee both receive the same level of satisfaction from eating pizza.
  Dirk gets more twice as much satisfaction as Lee from eating pizza.
  It is difficult to determine because the utility is subjective.

5. For many products, the total utility curve is

  strictly increasing because of increasing marginal utility.
  strictly decreasing because of diminishing marginal utility.
  increasing initially because of increasing marginal utility, but eventually decreases.
  increasing initially at a decreasing rate because of diminishing marginal utility but eventually decreases.

6. When consumers get the biggest bang for the buck, we say they

  used the loudest gun in hunting season.
  reached a consumer optimum.
  minimized consumer satisfaction.
  maximized marginal utility.

7. By choosing to consume at the consumer optimum, consumers will

  maximize their total utility.
  minimize their total utility.
  maximize the amount they spend on each good.
 

minimize the amount they spend on each good.

8. A consumer is in equilibrium when consuming two goods when which of the following holds?

  MUa/ Pa = MUb/ Pb
  MUa/ Ph =MUb/ Pa
  Pa/ MUa = Pb/ MUb
  MUa x Pa = MUbxPb

9. If the marginal utility of good 1 is 15 and its price is $3, and the marginal utility of good 2 is 12, and its price is $4, then the consumer

  has achieved a consumer optimum.
  should increase his or her consumption of good 1.
  should increase his or her consumption of good 2.
  should decrease his or her consumption of good 1.

10.Suppose the price of an iPod decrease and the price of HD TVs remains the same; what noticeable effect(s) occur(s)?

  the substitution effect only
  the real-income effect only
  the substitution effect and real-income effect, if there is a noticeable change in purchasing power
  the substitution effect and real-income effect, if there isn’t a noticeable change in purchasing power

11. The ______________ paradox was described by Adam Smith in 1776.

  diamond-carbon
  diamond-water
  diamond-life
  water-utility

12. What is the key to solving the diamond-water paradox?

  more water and fewer diamonds
  marginal utility
  total utility
  consumer demand

13. When solving the diamond-water paradox we notice that the marginal utility of

  diamonds are equal to the marginal utility of water.
  diamonds are greater than the marginal utility of water.
  diamonds are less than the marginal utility of water.
  water is equal to its price, and therefore lower than the marginal utility of diamonds.

14. The consumer surplus for water is

  greater than that for diamonds because water is nonessential.
  greater than that for diamonds because water is essential.
  less than that for diamonds because water is nonessential.
  less than that for diamonds because water is essential.

15. Suppose a consumer consumes only diamonds and water, and the price of diamonds increases. All else being equal, a consumer’s marginal utility for diamonds

  decreases and the marginal utility for water stays the same.
  increases and the marginal utility for water decreases.
  decreases and the marginal utility for water increases.
  increases and the marginal utility for water stays the same.

Fill in the blanks:

  1. Your taste determines the ______you derive from consuming a particular good
  2. _________utility is the change in _______utility resulting from a unit additional change in the consumption of a good.
  3. As long as marginal utility is positive, total utility is
  4. The law of diminishing marginal utility states that as an individual consumes more of a good during a given time period, other things constant, total utility _______