1.1 consumer behaviour

law of demand is

as a goods price falls, more is demanded

a condition of demand is

a determinant of demand, other than a goods own price, that fixed the position of the demand curve

rational behaviour is

acting in the pursuit of self-interest, which for a consumer means attempting to maximise the welfare, satisfactions or utility gained from the goods and services consumed

examples of conditions of demand are

PASIFIC- population, advertising, substitutes, interest rates, fashion trends, income, compliments

utility is

the satisfaction or economic welfare an individual gains from consuming a good or service

marginal utility is

the additional welfare, satisfaction or pleasure gained from consuming one extra unit of a good

the law of diminishing marginal utility is

for a single consumer the marginal utility derived from a goo or service diminishes for each additional unit consumed

the point of satiation

is where marginal utility is zero, and it is where utility is maximised

when making economic decisions consumers and firms seek to

maximise their utility, maximise their profits

disutility is

negative marginal utility, referring to negative feelings or displeasure with certain activities, goods, or services

diminishing MR supports downwards sloping demand curve as

consumers are only willing to buy if MU>=P, if prices are lower people are more willing to buy each subsequent unit because it has more value in terms of the satisfaction it buys

maximisation is subject to constraints of

limited income, a given set of prices, the budget constraint, limited time available

rational choice theory assumes

that consumers always behave rationally in allocating their limited budget between different products to maximise their total satisfaction from their purchases