#1
5. What is the relationship between total utility and marginal utility?
Total utility and marginal utility move in opposite directions.
ExplanationMarginal utility decreases as total utility increases.
#2
6. In the context of consumer behavior, what does the term 'utility' refer to?
The satisfaction or pleasure derived from consuming a good or service.
ExplanationMeasure of satisfaction obtained from consuming.
#3
12. According to the Law of Demand, how does the quantity demanded change with a decrease in price, assuming all other factors remain constant?
It increases.
ExplanationInverse relationship between price and quantity demanded.
#4
1. What is the Law of Diminishing Marginal Utility?
As consumption increases, total utility increases at a decreasing rate.
ExplanationConsumers gain less additional satisfaction from each unit consumed.
#5
2. Which of the following is NOT a characteristic of a Giffen good?
Positive income elasticity
ExplanationGiffen goods have negative income elasticity.
#6
7. How does the concept of 'income effect' relate to changes in consumer purchasing behavior?
It explains how changes in income impact the purchasing power of consumers.
ExplanationImpact of income changes on consumer buying power.
#7
8. What is the difference between total utility and marginal utility?
Total utility is the sum of marginal utilities, while marginal utility is the satisfaction from consuming one additional unit.
ExplanationAggregate satisfaction vs. satisfaction from one additional unit.
#8
13. What is the role of the budget constraint in consumer choice?
It determines the quantity of goods a consumer can buy given their income and the prices of goods.
ExplanationLimitation on purchasing power.
#9
3. What is the formula for calculating Marginal Utility (MU)?
MU = ΔP / ΔQ
ExplanationChange in total utility for each additional unit consumed.
#10
4. According to the Law of Equi-Marginal Utility, how should a consumer allocate their budget among different goods to maximize total utility?
Allocate budget such that the marginal utility per dollar is the same for all goods.
ExplanationAllocate spending to maximize satisfaction from each dollar spent.
#11
9. Which of the following is an assumption of the Law of Diminishing Marginal Utility?
Consumer preferences remain constant.
ExplanationAssumption of unchanged consumer preferences.
#12
10. If the price of a good increases, what is the expected impact on the consumer's equilibrium in terms of utility maximization?
Decrease in consumption of the good.
ExplanationDecreased consumption due to higher price.
#13
11. What is the concept of 'Cardinal Utility' in economics?
It refers to the measurement of utility using numerical values.
ExplanationQuantifiable measure of utility.