Practise deriving marginal and total utility, applying the equi-marginal condition to consumer bundles and evaluating rational-choice explanations of market demand.
The table shows the total utility gained by a consumer from the consumption of water.
| quantity<br>consumed<br>/bottles | total<br>utility |
|---|---|
| 0 | 0 |
| 1 | 30 |
| 2 | 40 |
| 3 | 48 |
| 4 | 54 |
| 5 | 58 |
What can be concluded from this table?
Marginal utility increases as consumption increases.
The consumer cannot switch expenditure to another product to increase total utility.
The marginal utility of the 3rd unit is 8 .
The marginal utility of the 5th unit is 2 .
Economists normally assume that the marginal utility from consuming additional goods is positive and diminishing.
What is the effect on total satisfaction of consuming extra units of the good?
Total satisfaction falls at a decreasing rate.
Total satisfaction falls at an increasing rate.
Total satisfaction rises at a decreasing rate.
Total satisfaction rises at an increasing rate.
Utility theory is based on the assumption of the 'rational consumer'.
What is necessary to act as a 'rational consumer'?
access to
complete
information
addictive
behaviour
choice is
independent
of other
consumers
no
yes
yes
yes
no
no
yes
yes
no
yes
no
yes
A consumer maximises his total utility by initially buying 10 units of good X and 10 units of good Y.
Assuming both goods are normal, what would cause this utility-maximising consumer to purchase more of good Y and less of good X ?
an increase in the marginal utility of good Y
an increase in the price of good Y
an increase in the tax on the consumption of good Y
an increase in the tax on the income of consumers
What is held constant when deriving an individual consumer's downward-sloping demand curve for a product?
marginal utility
the consumer's income
the price of the product
total utility
