Chapter 10 Homework
an individual's demand for food in restaurants depends on
1. the cost 2. the individuals taste and preferences 3. the popularity of the food
Consumers are
also concerned with fairness as exemplified by tipping in restaurants that will never be visited again
The economic model of consumer behavior predicts that the consumer will
choose the combination of housing and non-housing consumption that makes her as well off as possible from among the combinations of housing and non-housing items she can afford.
the law of diminishing marginal utility suggest that
consumers experience diminishing additional satisfaction as the consume more of a good or service
why might consumers not act rationally?
consumers might be overly optimistic about their future
the rule of equal marginal utility per dollar spent suggests that consumers maximize utility by
equalizing the marginal utility per dollar spent across goods and services
when the price of a product changes
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.
marginal utility is more useful than total utility in consumer decision making because
optimal decisions are made at the margin
When modeling consumer behavior, utility
reflects the satisfaction a consumer receives from consuming a particular set of goods and services.
behavioral economics
studying situations in which people do not appear to be making choices that are economically rational
what is the definition of marginal utility?
the change in utility from consuming an additional unit of a good or service
a budget constraint indicates
the limited amount of income available to consumers to spend on goods and services
What explanation might an economist provide why some people overeat when such behavior can lead to health consequences? Some people likely overeat because
they overvalue the utility from current choices
