#1
In economics, what does the term 'utility' refer to?
The satisfaction derived from consuming a good or service
ExplanationUtility refers to the satisfaction obtained from consuming goods or services.
#2
What is the economic term for the situation where a person or group can receive more of one thing by giving up something else?
Trade-off
ExplanationA trade-off occurs when obtaining more of one thing requires giving up something else.
#3
In consumer theory, what is 'marginal utility'?
The additional satisfaction gained from consuming one more unit of a good or service
ExplanationMarginal utility is the extra satisfaction gained from consuming an additional unit of a good or service.
#4
What is the 'income effect' in economics?
The change in consumption of a good due to a change in income
ExplanationThe income effect refers to changes in consumption resulting from alterations in income levels.
#5
What does the 'law of diminishing marginal utility' state?
As a consumer consumes more units of a good, the additional satisfaction from each additional unit decreases
ExplanationThe law of diminishing marginal utility asserts that the satisfaction gained from each extra unit of a good declines as consumption increases.
#6
What is the 'indifference curve' in microeconomics?
A curve showing the combinations of two goods that provide the same level of satisfaction to a consumer
ExplanationIndifference curves depict combinations of goods offering equal levels of satisfaction to a consumer.
#7
What is the 'budget constraint' in consumer theory?
The maximum amount of a good a consumer can afford given prices and income
ExplanationThe budget constraint represents the limit on consumption imposed by available income and prices.
#8
According to rational choice theory, what do individuals aim to do?
Maximize utility
ExplanationIndividuals seek to maximize their satisfaction or utility according to rational choice theory.
#9
What is the concept of 'revealed preference' in economics?
A theory suggesting that individuals reveal their preferences through their actions
ExplanationRevealed preference theory posits that preferences are demonstrated through choices.
#10
What is the difference between 'ordinal utility' and 'cardinal utility'?
Ordinal utility measures utility based on a ranking of preferences, while cardinal utility assigns numerical values to utility
ExplanationOrdinal utility ranks preferences, while cardinal utility assigns numerical values to quantify satisfaction.
#11
What is 'revealed preference theory' in consumer behavior?
A theory stating that consumer preferences are revealed through their choices
ExplanationRevealed preference theory posits that consumer choices reveal their underlying preferences.
#12
What does 'nudging' refer to in the context of behavioral economics?
A technique for encouraging people to make particular choices by presenting options in a way that subtly influences their decisions
ExplanationNudging involves subtly influencing decisions by presenting options in a way that steers individuals towards particular choices.