Human Consumption

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8 Terms

1
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Define “Human consumption”

  • The use of goods and services by people to satisfy their needs and wants.

2
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What are some factors that influence human needs? (HINTS: 4 things)

  • Geographical Environment (importation & exportation)

  • Career and Income (more income = more purchasing power)

  • Societal perceptions (culture, beliefs)

  • Economic and technological progress

  • Psychological

  • Personal

<ul><li><p>Geographical Environment (importation &amp; exportation)</p></li><li><p>Career and Income (more income = more purchasing power)</p></li><li><p>Societal perceptions (culture, beliefs)</p></li><li><p>Economic and technological progress</p></li><li><p>Psychological</p></li><li><p>Personal</p></li></ul><p></p>
3
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What is the “diminishing marginal utility”?

  • “The more you consume a good, the less extra satisfaction (utility) you get from each additional unit.”

  • Utility = satisfaction or happiness you get from consuming something

  • Marginal utility = the extra satisfaction from consuming one more unit

  • Diminishing = this extra satisfaction gets smaller each time you consume more

<ul><li><p>“The more you consume a good, the less extra satisfaction (utility) you get from each additional unit.”</p></li><li><p>Utility = satisfaction or happiness you get from consuming something</p></li></ul><ul><li><p>Marginal utility = the extra satisfaction from consuming one more unit</p></li><li><p>Diminishing = this extra satisfaction gets smaller each time you consume more</p></li></ul><p></p><p></p>
4
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What are some factors that contribute to purchase demand? (Give3-5 examples)

  • Income of consumers

  • Price of substitutes/complements

  • Changes in trends

  • Seasonal

  • Advertising

  • Price

5
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Define “substitute goods” and give examples

  • “goods which can be used in place of one another to satisfy a particular want.”

  • E.g. tea & coffee, Coke & Pepsi, Domino’s Pizza & PizzaHut

<ul><li><p>“goods which can be used in place of one another to satisfy a particular want.”</p></li><li><p>E.g. tea &amp; coffee, Coke &amp; Pepsi, Domino’s Pizza &amp; PizzaHut</p></li></ul><p></p>
6
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<p>Explain the graph of substitute goods</p>

Explain the graph of substitute goods

  • Price of Good A ↑ → Demand for Good B ↑

(because people switch)

  • Price of Good A ↓ → Demand for Good B ↓

(because people prefer the cheaper one)

7
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Define “complementary goods” and give examples

  • “two goods that are used together, so the demand for one depends on the demand for the other.”

  • If you buy one, you usually need the other.

  • E.g. sugar & tea, pasta & pasta sauce

<ul><li><p>“two goods that are used together, so the demand for one depends on the demand for the other.”</p></li><li><p>If you buy one, you usually need the other.</p></li><li><p>E.g. sugar &amp; tea, pasta &amp; pasta sauce</p></li></ul><p></p>
8
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<p>Explain the graph of complementary goods</p>

Explain the graph of complementary goods

  • If price of Good A ↑ → Demand for Good B ↓

(because people stop buying the pair)

  • If price of Good A ↓ → Demand for Good B ↑

(more people buy the pair)