1.2.1 - Rational decision making

• What is a Normal good?


  A good for which demand increases as income increases.
• What is an inferior good?


  A good for which demand decreases as income increases.
• What is Rational behaviour and how does it link to a consumer?

  Acting in pursuit of self-interest

  for a consumer this is maximising the satisfaction or utility from a product
• does a downward sloping demand curve assume rational behaviour?


  Yes because as price falls, consumers will have a greater incentive to consume more goods due to a greater relative utility.
• What is utility?


  The satisfaction or economic welfare an individual gains from consuming a good.
• What is Marginal utility?


  Additional satisfaction gained from consuming one more unit of a good or service.
• What is diminishing marginal utility?


  Decreasing satisfaction from consuming additional units of a good or service.