question
the enjoyment or satisfaction people receive from consuming goods and services
answer
what is the economic definition of utility?
question
no
answer
is utility measurable?
question
the change in utility from consuming an additional unit of a good or service
answer
what is the definition of marginal utility?
question
consumers experience diminishing additional satisfaction as they consume more of a good or service
answer
the law of diminishing marginal utility suggests that....
question
optimal decisions are made at the margin
answer
marginal utility is more useful than total utility in consumer decision making because....
question
it changes the relative price of the product causing a substitution effect and at the same time it changes the purchasing power of the buyer causing an income effect as well
answer
when the price of a product changes.....
question
When the price of a good
rises, the ratio of the marginal utility to price falls, leading consumers to buy less of that good
rises, the ratio of the marginal utility to price falls, leading consumers to buy less of that good
answer
Explain how a downward-sloping demand curve results from consumers adjusting their consumption choices to changes in price
question
The good would have to be an inferior good, and the
income
effect would have to be
larger
(in absolute value) than the
substitution
effect.
income
effect would have to be
larger
(in absolute value) than the
substitution
effect.
answer
What would need to be true for a demand curve to be upward sloping?
question
a normal good because as income increases people drive more
answer
For most people, gasoline is likely to be....
question
increases with the number of consumers who use it
answer
network externalities are present when the usefulness of a product....
question
-have become established
-use inferior technology
-use inferior technology
answer
network externalities are likely to be important for products that....
question
path dependence is where the technology that was first available has advantages over better technologies that were developed later
answer
what is path dependence?
question
firms will not raise prices in response to an increase in demand
answer
How does the fact that consumers apparently value fairness affect the decision that businesses make?
question
situations in which people make choices that do not appear to be economically rational
answer
behavioral economics is the study of...
question
Technology is the process of using inputs to make output, while technological change is when a firm is able to produce the same output using fewer inputs
answer
What is the difference between technology and technological change?
question
In the short run, at least one of a firm's inputs is fixed, while in the long run, a firm is able to vary all its inputs and adopt new technology
answer
What is the difference between the short run and the long run?
question
fixed cost
answer
Any cost that remains unchanged as output changes represents a firm's...
question
variable cost
answer
Any cost that changes as output changes represents a firm's...
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