Economics Questions and Answers

Marginal utility is addition made to total utility by consuming one more unit of a commodity.

Total Utility is Summation of Marginal Utilities: in order to get the total utility, you will have to sum up the additional/extra utility (MU) from the given levels of consumption.

An ostentatious good is a good where demand is often greater when the price of it is higher. These are goods we buy in order to 'keep up with the Jones'. The good may give little actual utility apart from the pride of owning something very few other people own.

A good with a perfectly inelastic demand will always sell irrespective of the change in the price of the product. This is one way the government can increase revenue generation through taxation. 

An example of perfectly inelastic demand would be a lifesaving drug that people will pay any price to obtain.

Price elasticity is a measure of the responsiveness of demand or supply of a good or service to changes in price. The price elasticity of demand measures the ratio of the proportionate change in quantity demanded to the proportionate change of the price.

In most cases, the supply curve is drawn as a slope rising upward from left to right, since product price and quantity supplied are directly related (i.e., as the price of a commodity increases in the market, the amount supplied increases, and at a lower price, supply decreases).