Principles of Consumer Behavior and Utility Maximization Quiz

Utility theory assumes consumers consistently make rational choices.

The law states that each additional unit of a good provides less satisfaction.

Total utility is the overall satisfaction, while marginal utility is the satisfaction gained from consuming one more unit.

It represents the additional value consumers receive when paying less than their maximum willingness to pay.

It represents the willingness to exchange goods on an indifference curve.

It states that there is an inverse relationship between the price of a good and the quantity demanded.

This equation shows the trade-off between the prices of two goods and the consumer's income.

It indicates the rate at which a consumer is willing to exchange one good for another while maintaining the same level of satisfaction.

It is based on the impact of changes in prices (substitution effect) and changes in real income (income effect).

Ordinal utility ranks preferences, while cardinal utility assigns numerical values to intensity.

It is the phenomenon where the demand for a good increases as its price rises, signaling status or exclusivity.

It shows the relationship between the quantity of a good consumed and consumer income.

The assumption is that consumers make decisions based on rationality and complete information.

This utility function assumes a constant rate at which one good can be substituted for another.