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ECS1501 ASSESSMENT 8 2024 MCQ ANSWERS
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ECS1501 ASSESSMENT 8 2024 MCQ ANSWERS
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ECS1501-24-Y Assessments Assessment 8QUIZ
Started on Sunday, 1 September
2024, 6:03 AM
State Finished
Completed on Sunday, 1 September
2024, 7:38 AM
Time taken 1 hour 34 mins
Marks 11.00/11.00
Grade 100.00 out of 100.00
Question 1
Complete
Not graded
I confirm
that this assessment will be my own
individual work;
that I will not communicate with anyone
else in any way during the completion of
this assessment;
that I will not cheat in any way in
completing and submitting this
assessment.
I confirm.
I do not confirm.
,Question 2
Complete
Mark 1.00 out of 1.00
Given the prices of goods and services,
which of the following indicates
consumer equilibrium?
The consumer spends his or her
income in such a way that the
weighted marginal utility (marginal
utility per rand) is the same for the
goods.
The consumer spends his or her
income in such a way that he or she
attains the lowest possible total
utility.
The consumer spends his or her
income in such a way that he or she
attains the highest possible
marginal utility.
The consumer spends his or her
income in such a way that the
weighted marginal utility (marginal
utility per rand) is at its lowest.
The consumer spends his or her income
in such a way that the weighted marginal
utility (marginal utility per rand) is the
same for the goods.
Consumer equilibrium refers to a
situation where a consumer maximizes
their satisfaction or utility given their
limited income and the prices of goods
and services. In this context, the concept
of marginal utility is crucial. Marginal
utility is the additional satisfaction or
utility a consumer derives from
consuming one more unit of a good or
service.
To achieve consumer equilibrium, the
consumer allocates their income to
maximise overall satisfaction. The
consumer evaluates the marginal utility
of each good or service relative to its
price. In other words, the consumer
considers the "bang for the buck" or the
utility gained per unit of money spent on
each good.
,Question 3
Complete
Mark 1.00 out of 1.00
If a consumer allocates her income
between two goods, x and y, then she will
be in equilibrium when
MUx = MUy and she has spent all of
her income.
MUx/Px = MUy/Py and she is below
her budget constraint.
MUx/MUy > Px/Py and all of her
income is spent.
MUx/Px = MUy/Py and all of her
income is spent.
A consumer will be in equilibrium when
MUx/Px = MUy/Py, and all of her income
is spent.
The ratio of MUx/Px represents the
marginal utility per unit of money spent
on good x, while the ratio of MUy/Py
represents the marginal utility per unit of
money spent on good y. When these
ratios are equal (MUx/Px = MUy/Py), it
implies that the consumer is allocating
their income in such a way that the
additional satisfaction gained from the
last rand spent on each good is equal.
This allocation strategy ensures that the
consumer cannot further increase their
overall satisfaction by reallocating their
spending between goods. Any
reallocation of spending from one good
to another would lead to a decrease in
the marginal utility per unit of money
spent for the goods involved, reducing
overall satisfaction.
Additionally, the statement specifies that
all of the consumer's income is spent.
This is important because in consumer
equilibrium, the consumer has fully
utilised their budget to maximize their
satisfaction. If there is any unspent
income, it implies that the consumer is
not maximizing their utility and could
potentially achieve a higher level of
satisfaction by allocating the remaining
income differently.
, Question 4
Complete
Mark 1.00 out of 1.00
The relationship between total utility and
marginal utility is as follows:
When total utility is at a maximum
point, marginal utility is at its
maximum.
As total utility increases at a
decreasing rate, marginal utility
decreases.
As total utility increases at a
decreasing rate, marginal utility
increases.
As total utility starts to decline,
marginal utility becomes positive.
If you have read the section on utility with
understanding, you would have realised
the important role played by the marginal
concept in economic analysis. As you
carry on with this module, you will see
that the marginal concept re-appears
again and again: from marginal utility, to
marginal output, marginal cost and
marginal profit. But the marginal concept
is not only a feature of microeconomics,
when you start your macroeconomic
studies you will soon be introduced to
concepts like marginal tax rate, marginal
propensity to consume or the marginal
propensity to save. So please make sure
you are comfortable with this section of
the work.
The marginal utility of a good or service
is the change in total utility if one more
unit of that good or service is consumed.
As long as the extra satisfaction (the
marginal utility) is positive, total utility
will increase. As one consumes more of
a product, the additional satisfaction
might decrease – consuming a second
bunny chow might not be as satisfying as
the first one was, but it still adds to your
total satisfaction. Only when the marginal
utility is negative will total utility
decrease. Note the difference between a
decreasing marginal utility and a
negative marginal utility.
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