Lesson 6

As we spend more money our total pleasure increases to a maximum point, but with additional increases in spending our marginal utility (additional pleasure) never actually declines.

False

The $ $ $ benefit received by a person paying a lower price than the person would have been willing to pay is called ___________ .

Consumer Surplus

The diminishing marginal utility effect states that as more of an item is consumed and the amount of additional satisfaction decreases, the seller must ________ price to induce the consumer to buy more.

Decrease

The substitution effect is the concept that if the price of X goes ________ , there will be an increase (shift right) to X away from substitute goods.

Down

Many individuals receive a higher value of utility from spending rather than saving and therefore choose to save a large amount of money.

False

In the early 1830's _____________ , a philosopher economist, studied consumer behavior.

Jeremy Bentham

The Law of Diminishing Returns states that as more units are consumed past some point, _________ additional pleasure will be received.

Less

Assume you are going to lunch and have a choice of two meals. The first meal would give an increase in marginal utility of 100 with a $25 price. The second meal would give you an increase of only 10 with a $1 price. The third meal will give you an increase of 50 with a $10price. Which meal should you logically choose ?

Second

_____________ was the founder of the institutionalist school of economics and was also a critic of marginalist theory.

Thorstein Veblen

________________ concept of "conspicuous consumption" suggested that consumer behavior is often based on sociology and is, thereby ,difficult to quantify.

Thorstein Veblen's

Consider the example of an individual in a grocery store examining two cans of peaches, Alpha Peaches and Beta Peaches. If Alpha is thought to provide 10 units of pleasure per dollar and Beta is thought to provide 8 units per dollar, then Alpha should be chosen.

True

For an individual at a moment in time, consumer behavior is consistent between paired comparison items.

True

For an individual the utility obtained per unit of consumption may vary based upon "need at the moment" such as with police or doctor services.

True

In addition to price, "time" relative to utility is another consideration in consumer behavior.

True

In the field of Marketing the concepts of marginal values and marginal utility per dollar are important ideas for brand comparisons among goods and services.

True

Savings (non-consumption) can have a utility function.

True

The utility maximizing rule states that a consumer should allocate her/his income such that the ________________________ each product is the same.

marginal satisfaction per dollar spent on