AP Economics Chapter 21 consumer Behavior and Utility Maximization
a price of a good effecting a consumer's real income is known as the....
income effect
Budget Constraint
-at any given time the consumer has a fixed, limited income.
Preferences
-each consumer has their own preferences for certain goods and services available in the market
Prices
-goods are scarce relative to the demand for them, so every good has a price tag
Rational Behavior
-the consumer is a rational person trying to get the great amount of satisfaction/utility out of their money
When prices of DVD players __________ significantly, there were increased purchases of DVDs.
Decreased
If MU decreases slowly, as consumption increases then demand is likely__________.
Elastic.
The impact that a change in the price of a product has on a CONSUMER'S REAL INCOME, consequently on the quantity demanded of that good.
Income Effect
If MU of a product decreases rapidly as additional units are consumed then demand is likely__________.
Inelastic.
when maximizing utility of a consumer's income the ratio of the marginal utility of the first product of the________unit purchased of a product to its price IS THE SAME for all products bought.
Last
The more of a product a consumer obtains, the less they still want more of it.
Law of Diminishing Marginal Utility.
the law of demand can be explained in terms of________&______
income and substitution or by the law of diminishing marginal utility
The utility maximizing rule and demand curve are logically CONSISTENT a lower price of a product is needed to get the consumer to buy_______ of a particular product.
More
When TU is increasing MU is________.(negative or positive?)
Positive.
In deriving a consumer's demand for a particular product, two factors are held constant. Name them.
Price of related goods. Income.
List 4 dimensions of a consumer's behavior.
Rational behavior, preferences, budget constraint and prices.
Utility is a ______________concept, and it is not the same thing as usefulness.
Subjective
The impact that a change in a product's price has on its RELATIVE EXPENSIVENESS & consequently on the quantity demanded.
Substitution Effect
Marginal Utility
The EXTRA satisfaction a consumer realizes from an additional unit of that product
Noncash gifts are less preferred than cash gifts because they yield LESS __________utility to consumers.
Total
The overall satisfaction a consumer gets from consuming a good or service.
Total Utility
The total amount of satisfaction or pleasure a person derives from consuming some specific quantity.
Total Utility
Want satisfying power.
Utility
The consumer should allocate their income so that the last dollar spent on each product yields THE SAME amount of extra marginal utility
Utility-Maximizing Rule
a RISE in a price tends to____________a consumer's real income
decrease
When a product's price rises it becomes more_________and prices of other goods become relatively lower. the consumer then buys less of the product in question and more of the other products this is known as the_____________.
expensive & substitution effect
the marginal utility of diamonds is______
high
total utility of water consumed is very______
high
a FALL in the price of a good tends to__________a consumer's real income.
increase
the marginal utility of the last unit of water consumed is very ______
low
total utility of diamonds is very______
low
MU/$ is what?
marginal utility per dollar spent
Marginal Utility per Dollar
to make amounts of extra utility derived from different priced goods comparable, marginal utilities must be put on a per-dollar-spent basis.
