4.1.2.1 Consumer Behaviour NOTES

What does rational economic decision making aim to maximize?

• Market volatility

• Utility or well-being

• Environmental impact

• Government intervention

Which of the following is NOT a type of economic incentive?

• Profits

• Natural disasters

• Social recognition

• Prices

What does marginal utility measure?

• Total satisfaction from all units consumed

• Cost of producing one more unit

• Change in total utility from consuming an additional unit

• Market demand for a product

What is the hypothesis of diminishing marginal utility?

• Total utility is unaffected by consumption levels

• Marginal utility decreases as consumption increases

• Marginal cost decreases with increased production

• Marginal utility increases as consumption increases

What is the goal of utility maximisation in economics?

• To minimize costs and maximize profits

• To ensure equitable distribution of resources

• To maximize total utility or satisfaction

• To balance supply and demand

According to the principle of equal marginal utility per pound, when is utility maximisation achieved?

• When prices are lowest for all goods

• When marginal utility per pound is maximized for one good

• When total utility is minimized

• When marginal utility per pound is equal across all goods and services

What does the 'margin' refer to in economic decision making?

• The market equilibrium point

• The total cost of production

• The incremental changes or adjustments made when making choices

• The difference between total revenue and total cost

What is total utility?

• The average utility of goods consumed

• The overall satisfaction obtained from consuming a certain quantity of goods or services

• The cost associated with consuming goods

• The satisfaction from the last unit consumed

What role do economic incentives play in rational economic decision making?

• They solely determine the prices of goods

• They have no impact on decision making

• They determine the legal framework for economic activities

• They influence the perceived costs and benefits of each choice

How does the concept of marginal utility affect consumer choice?

• It has no effect on the choices consumers make

• It determines the pricing strategy of firms

• It influences how consumers allocate their budget across different goods

• It only affects government policy decisions