MGEA01H3 Chapter 10: The Rational Consumer (Chapter 10)

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erinllama288

31 Aug 2015

School

UTSC

Department

Economics for Management Studies

Course

MGEA01H3

Professor

Michael H O

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Utility: is a measure of the satisfaction the consumer derives from consumption of a good or service. Consumption bundle: is the collection of all the goods and services consumed by an individual. Utility function: gives the total utility generated by his or her consumption bundle. Consumers use consumption in order to produce utility. The concept of the utility function is to represent the fact that when people consume, they take into account their preferences and tastes in a more or less rational way. When consumers make a decision, they will first consider the changes in his/her utility from consuming one more of a good or service; this illustrates the point that to maximize total utility, consumers must focus on marginal utility. Marginal utility: is the change in total utility generated by consuming one additional unit of that good or service. Marginal utility curve: shows how marginal utility depends on the quantity of a good or service.

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1.	_____	The satisfaction or benefit that consumers receive from consuming goods or services.
2.	________________ _	A particular combination of specific quantities of goods or services
3.	________________ _	Consumers can rank all conceivable bundles of goods or services
4.	_____	If A is preferred to B, and B is preferred to C, then A is always preferred to C.
5.	_____	Equation showing a consumerâs perception of the total utility forthcoming from consuming each bundle of goods and services.
6.	_____	A set of consumption bundles each and every one of which provides a consumer with exactly the same level of total utility.
7.	_____	The number of units of Y that must be given up for total utility to remain the same when one more unit of X is consumed.
8.	_____	The addition to total utility attributable to consuming one more unit of a good, holding the consumption of all other goods constant.
9.	_____	The line showing all bundles of goods that can be purchased at given prices if the entire income is spent.
10.	_____	The change in the consumption of a good that would result if the consumer remained on the original indifference curve after the price of the good changes.
11.	_____	The change in consumption of goods results strictly from the change in purchasing power after the price of a good changes.
12.	________________ _	The sum of the substitution and income effects.
13.	_____	A good for which quantity demanded varies directly with price, causing an upward sloping demand curve.
14.	_____	A list of prices and the corresponding quantity consumers are willing and able to purchase at each price.

blushwildebeest943

Which of the following statements is correct?

i. utility refers to the satisfaction or fuzzy glow derived from consumption of goods

ii. a good may yield utility when acquired but not be functionally useful

iii. utility and usefulness are synonymous (i.e., they have equivalent meanings)

iv. the marginal utility from consuming an additional unit of a good will be positive, whereas the marginal utility of consuming an additional unit of a bad will be negative

tanwildebeest482

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 .............

pucedog162

MGEA01H3 Chapter 10: The Rational Consumer (Chapter 10)

MGEA01H3 Full Course Notes

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