Microeconomics Ch.7 Elasticity and Consumer Choice

Law of Diminishing Marginal Utility

Marginal Utility

Substitution effect

Income effect

Marginal Benefit

Price elasticity of demand

Income elasticity

normal good

inferior good

price elasticity of supply

The first unit of a product generates more additional satisfaction or utility than the​ second, unit, which generates more additional utility than the​ third, and so on. In graphical​ terms, this means that as the number of movies​ increases, the total utility curve becomes progressively​ flatter: the slope of the total utility curve decreases. The marginal utility curve shows the slope of the total utility​ curve, so by the law of diminishing marginal​ utility, it is negatively sloped.

As the consumption of a product​ increases, utility
....
This illustrates the law of

The equimarginal rule tells us to pick the combination of two activities where the marginal utility per dollar for the first activity equals the marginal utility per dollar for the second activity. This is where utility is maximized.

Shipping the Good Apples​ Out? Suppose apples come in two quality​ levels, low quality and high quality. At a store in the​ apple-growing region, the price of​ low-quality apples is ​$33 per​ pound, and the price of​ high-quality apples is ​$66 per pound.
TimmyTimmy lives in the​ apple-growing region and buys 8 pounds of each type. His marginal utility of​ low-quality apples is 99 utils and his marginal utility of​ high-quality apples is 1818 utils.
Is TimmyTimmy maximizing his​ utility?
A.
Yes. The marginal utility of high quality apples is greater than the marginal utility of low quality apples.
B.
No. The marginal utility per dollar of​ low-quality apples is greater than the marginal utility per dollar of​ high-quality apples.
C.
No. The marginal utility per dollar of​ high-quality apples is greater than the marginal utility per dollar of​ low-quality apples.
D.
Yes. The marginal utility per dollar of each good is equal.
Your answer is correct.
Suppose that TimmyTimmy moves to an area outside the​ apple-growing region. As a result of increased shipping​ costs, the price of both​ low-and high-quality apples increases by​ $2 per pound in his new area. Suppose further that TimmyTimmy is still able to consume 8 pounds of each type of apple. In this new​ scenario, is TimmyTimmy maximizing his​ utility?
A.
No. The marginal utility per dollar of​ high-quality apples is greater than the marginal utility per dollar of​ low-quality apples.
Your answer is correct.B.
No. The marginal utility per dollar of​ low-quality apples is greater than the marginal utility per dollar of​ high-quality apples.
C.
Yes. The marginal utility of high quality apples is greater than the marginal utility of low quality apples.
D.
Yes. The marginal utility per dollar of each good is equal.
​Therefore, TimmyTimmy should purchase
more
​high-quality apples and
fewer
​low-quality apples.

The key region of the brain for the valuation of benefits is the
nucleus accumbens
.

The key region of the brain for the valuation of costs is the
insular cortex

The key region of the brain responsible for comparing benefits and costs is the
prefrontal cortex
.

In the Pepsi​ challenge, a majority of consumers favored Pepsi in blind taste​ tests, but Coke in​ non-blind taste tests.

Consumers are subject to present bias in the sense that they systematically underestimate the strength of
future consequences

To counteract the effects of present bias in smoking behavior, the tax per pack of cigarettes is roughly $11 per pack

More saving and less spending because the marginal benefit of saving now exceeds the marginal benefit of spending.

People tend to track consumption by

Johnny walks into a car dealership and says he​ won't pay any more than​ $20,000 for the new Nissan he wants. The Nissan dealer says the retail price of the car is​ $23,999. By stating their price preferences up​ front, each are attempting to use