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Micro Economics
Midterm
6
Business
11/04/2009
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Term
Consumer Preference Ranking
 Definition
Preferences must be
1. Complete AND 2. Transitive
Term
Utility Function
 Definition
benefits consumers obtain from consumption of the G/S
Term
MRS
 Definition
Marginal rate of substitution

absolute value of the slope of the indifference curve

Diminishes with movement downward along an indifference curve....increasing X and Decreasing Y
Term
Marginal Utility
 Definition
MU = deltaU/deltaX
Term
Marginal Rate of Substitution
 Definition
MRS= -(deltaY/deltaX)

OR

MUx/MUy
Term
Consumers Budget Line
 Definition
M = PxX + PyY