The theory of consumer behavior assumes that - consumers behave rationally, attempting to maximize their satisfaction - consumers do not know how much marginal utility they obtain from successive units of various products - consumers have unlimited money incomes - marginal utility is constant
Added by Albert A.
Step 1
Step 1: The theory of consumer behavior assumes that consumers behave rationally, attempting to maximize their satisfaction. Show more…
Show all steps
Your feedback will help us improve your experience
Manasvee Singh and 82 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
In studying consumer choice, we have the Equi-marginal and Utility maximizing rules. What are two differences observed between these rules? Are consumers truly driven by utility maximization as the theory suggests?
James K.
Law of Diminishing Marginal UtilityIndicate whether each of the following statements is true or false. Explain why.A.The law of diminishing marginal utility states that as an individual increases consumption of a given product within a set period of time, the utility gained from consumption eventually declines.B.Marginal utility measures the added satisfaction derived from a one-unit increase in consumption, holding consumption of other goods and services constant.C.When goods are relatively scarce, the law of diminishing marginal utility means that the added value of another unit of goods will be small in relation to the added value of another unit of services.D.The law of diminishing marginal utility gives rise to a downward-sloping demand curve for all goods and services.
Jennifer S.
'When economists say that market equilibrium is consistent with economic efficiency; they mean the total gains from trade (the combined area of producer and consumer surplus) are smaller than potentially could be the case at a different price and quantity: all units creating more benefit than cost have been produced: some units have been produced that cost more than the benefits they create consumers and producers have made decisions without properly taking into account the market price.'
Juan N.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD