# Shared Flashcard Set

## Details

ECN 143:Notes:Day 12
ECN 143:Notes:Day 12
28
Economics
02/22/2016

Term
 What is the Algebraic Formula for Price Elasticity of Demand?
Definition
 Slope*(Price/Quantity)
Term
 What is the slope of this demand function?QD=A-BP
Definition
 -B-----
Term
 What do Indifference Curves Represent?----
Definition
 A diagram depicting equal levels of utility (satisfaction) for a consumer faced with various combinations of goods.---
Term
 What is Marginal Rate of Substitution?---
Definition
 The amount of one good that an individual consumer is willing to give up to obtain one more unit of another good.---
Term
 The Marginal Rate of Substitution of "Good X" for "Good Y" does what what as the consumption of "Good X" increases?----
Definition
 Declines----
Term
 What is the shape of an indifference curve?---
Definition
 Convex, it slopes down from left to right---
Term
 What kind of marginal utility do consumers exhibit?---
Definition
 Diminishing Marginal Utility----
Term
 What is an indifference set?---
Definition
 A table that represents combinations of Good X and Good Y to illustrate the Marginal Rate of Substitution for Good X and Good Y.---
Term
 If for every "A" of "Good X" one would sacrifice "B" of "Good Y", what would the indifference curve look like?----
Definition
 A line, it would be linear.-----
Term
 What kind of slope do all indifference curves have?---
Definition
 Negative---
Term
 What does the negative slope of the indifference curve insure?---
Definition
 That consumers prefer more to less aka consumer preferences are monotone.---
Term
 If preferences are monotone what does that mean?----
Definition
 If a consumer enjoys a good, no matter how much of the good is given, then utility will always increase.----
Term
 What is an indifference Map?----
Definition
 Multiple indifference curves on a diagram in which each combination could lie on it's own distinct indifference curve.---
Term
 Utility can be what type of number?----
Definition
 Any non-negative real number----
Term
 What is Transitivity?---
Definition
 Suggestion that if Combination A is preferred to Combination B, and Combination B is preferred to Combination C, then Combination A is preferred over Combination C.---
Term
 What reflects the transitivity of consumer preferences?---
Definition
 Indifference Curves----
Term
 Do Indifference Curves Cross?----
Definition
 No, they never cross.---
Term
 If two combinations lie on the same indifference curve then what?----
Definition
 Then the combinations must be indifferent of one another---
Term
 If a combination is higher than another combination on an indifference curve, the what?---
Definition
 It is preferred over the lower combination.---
Term
 What do consumers try to maximize?---
Definition
 Their utility aka satisfaction----
Term
 Consumers prefer more utility, which means consumers prefer what?----
Definition
 Higher indifference curves----
Term
 The higher an indifference curve, the more what does the combination on the curve possess?----
Definition
 Utility----
Term
 What is a Budget Constraint aka Budget Line?---
Definition
 A line that illustrates every possible combination of two goods that an individual consumer is able to purchase given a particular money income and prices for the two goods.----
Term
 What is the Consumption Possibility Frontier?---
Definition
 A graph of the maximum quantities of goods (usually two) that an economy can consume in a specified situation. Used to illustrate the potential benefits from trade by showing that it can expand consumption possibilities.----
Term
 What is the consumer's problem?---
Definition
 Consumer wants to maximize utility while subject to a budget restraint.-----
Term
 What is the Utility Maximization Point?------
Definition
 Where an indifference curve sits right on the budget line. Where the consumer gets the maximum utility within a budget.-----
Term
 What is a well-defined set?----
Definition
 A set where you know what is in it, and what is not.----
Term
 Indifference sets and budget constraint lines are what kind of sets?---
Definition
 Well-Defined Sets---
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