Term
| The utility of a consumer is: |
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Definition
| A measure of the satisfaction the consumer derives from consumption of goods and services |
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Term
| An individual's consumption bundle is: |
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Definition
| the collection of all the goods and services consumed by that individual |
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Term
| An individual's utility function gives: |
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Definition
| the total utility generated by his or her consumption bundle. |
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Term
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Definition
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Term
| The marginal utility of a good or service is: |
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Definition
| The change in total utility generated by consuming one additional unit of that good or service. |
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Term
| The marginal utility curve shows: |
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Definition
| How marginal utility DEPENDS on the quantity of a good or service consumed. |
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Term
| The principle of Diminishing Marginal Utility says that: |
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Definition
| Each successive unit of a good or service consumed adds less to total utility than the previous unit. |
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Term
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Definition
| A measure of a person's satisfaction from consumption, expressed in units of UTILS. |
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Term
| Consumers try to maximize: |
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Definition
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Term
| A consumer's utility function shows the relationship between the: |
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Definition
| Consumption bundle and the total utility it generates. |
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Term
| To maximize utility, a consumer considers:_______. It is illustrated by (which curve)? |
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Definition
| the marginal utility from consuming one more unit of a good or service, illustrated by the Marginal Utility Curve. |
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Term
| The Principle of Diminishing Marginal Utility holds: |
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Definition
| Easch successive unit consumed adds less to toal utility than the previous unit. |
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Term
| A Budget Constraint requires that: |
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Definition
| The cost of a consumer's consumption bundle be no more than the consumer's total income |
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Term
| A consumer's Consumption Possibilites is the set of: |
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Definition
| All consumption bundles that can be consumed given the consumer;s income and prevailing prices. |
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Term
| A consumer's Budget Line shows: |
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Definition
| The consumption bundles available to a consumer who spends all of his or her Income. |
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Term
| The Optimal Consumption Bundle is the consumption bundle that : |
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Definition
| Maximizes a consumer's total utility given his or her budget constraint. |
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Term
| The Budget Constraint requires that: |
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Definition
| A consumer's total expenditure be no more than his or her income. |
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Term
| The consumer's Consumption Possibilites are: |
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Definition
| The set of consumption bundles that satisfy the budget constraint. |
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Term
| A Consumer who spends all of his or her income chooses a point on his or her |
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Definition
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Term
| The budget line's Slope is __________ to the opportunity cost of the good on the horizontal axis in terms of the good on the vertical axis. |
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Definition
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Term
| The consumption choice that maximizes total utility given the consumer's budget constraint is the: |
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Definition
| Optimal Consumption Bundle. |
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Term
| The optimal consumption bundle must lie on the _________________________ line. |
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Definition
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Term
| The Marginal Utility per Dollar spent on a good or service is: |
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Definition
| The additional utility from spending One more dollar on that good or service. |
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Term
| The optimal Consumption Rule says that: |
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Definition
| when a consumer maximizes utility, the marginal utility per dollar spent must BE THE SAME for all goods and services in the consumption bundle. |
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Term
| A utility-maximizing consumer allocates spending so that:_________. It is also known as the __________________ rule. |
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Definition
The Marginal Utility per dollar (the marginal utility of a good divided by its price) is the same for all goods. It is also known as the Optimal Consumption Rule. (The optimal consumption bundle satisfies this rule
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Term
| Whenever the marginal utility per dollar is higher for one good than for another good, the consumer should spend_________________. By doing this, the consumer will ___________________. |
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Definition
| One dollar MORE on the good with the higher marginal utility per dollar and one dollar LESS on the other. By doing this, the consumer will move closer to his or her optimal consumption bundle. |
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Term
| The Individual demand Curve for a good shows the relationship between: |
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Definition
| Quantity demanded and price for an individual consumer. |
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Term
| The Substitution Effect of a change in the price of a good is the change in the: |
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Definition
| Quantity consumed of that good as the consumer substitutes the good that has become relatively cheaper for the good that has become relatively MORE expensive. |
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Term
| The Income Effect of a change in the price of a good is the change in the: |
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Definition
| Quantity consumed of that good that results from a change in the consumer's purchasing power due to the change in the price of a good. |
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Term
| The market demand curve for a good is: |
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Definition
| The horizontal sum of each consumer's Individual Demand Curve. |
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Term
| Most goods absorb only a ___________ of a consumer's spending. For such goods, the _______________ of a price change is the only important effect of the price change of demand. It causes _________________________. |
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Definition
a) Small Fraction
b) Substitution Effect
c) Individual demand curves and the market demand curve to slope DOWNWARD. |
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Term
| When a good absorbs a large fraction of a consumer's spending, the: |
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Definition
| Icome Effect of a price change is present in addition to the Substitution Effect. |
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Term
| For normal goods, demand rises/falls when: |
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Definition
| A consumer is richer and falls when a consumer is poorer, so that income effect reinforces the substitution effect. |
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Term
| For inferior goods, demand rises/falls when: |
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Definition
| A consumer is poorer and falls when a consumer is richer, so that the icnome and substitution effects move in the opposite direction. |
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