1.2.1 Rational Decision Making

Question 1

How does rationality link to consumers in economic assumptions

Answer 1

-Rational consumers make choices to maximising utility from purchasing and consuming goods/services using a limited budget

Question 2

Rational choice model assumes the following

Answer 2

• Consumers choose independently
• A Consumer has fixed and consistent tastes and preferences
• Consumers always make an optimal choice given their preferences

Question 3

What does utility measure

Answer 3

the satisfaction we get from purchasing and consuming a product

Question 4

Most economists assume that all ‘economic agents’ aim to ……. their utility

Answer 4

maximise

Question 5

Maximise utility for business means what

Answer 5

maximising profit

Question 6

What is total utility mean

Answer 6

The total satisfaction from a given level of consumption

Question 7

What does marginal utility mean

Answer 7

The change in satisfaction from consuming an extra unit

Question 8

What does Diminishing marginal utility mean

Answer 8

Links to diminishing returns

The more of a product you buy the less satisfaction you get per unit