Shared Flashcard Set

Details

Econ 302 Chapter 3
Intermediate MicroEconomics
12
Economics
Undergraduate 3
03/04/2013

Additional Economics Flashcards

 


 

Cards

Term
Marginal Rate of Substitution (MRS)
Definition
The rate at which a consumer is willing to substitute one good for another good and still maintain the same level of satisfaction.
Term
Marginal Rate of Substitution for X with Y (MRSxy)(Definition)
Definition
The amount of Y a person is willing to give up to get one more unit of X.
Term
Marginal Rate of Substitution for X with Y (MRSxy)(Formula)
Definition
–ΔY/ΔX
Term
Diminishing Marginal Utility
Definition
As a person gains more units of a good, the value of each new unit is lower than the one before
Term
Four Assumptions of Indifference Curve Analysis
Definition
Completeness
More Is Better
Diminishing Marginal Rate of Substitution
Transitivity
Term
Utility Function
Definition
U = f(X, Y) where X is the amount of good X that you consume, and Y is the amount of good Y that you consume
Term
Change in Utility (Formula)
Definition
∆U=MUx∆X+MUy∆Y
Term
Budget Line (Formula)
Definition
PXX + PYY = M (Budget)
Term
The Market Rate of Substitution
Definition
The rate at which one good can be exchanged for another at current market prices.
Term
The Market Rate of Substitution for X with Y (Description)
Definition
The amount of Y which must be given up in order to get one more unit of X, given a fixed budget and market prices.
Term
The Market Rate of Substitution for X with Y (Formula)
Definition
Px/Py
Term
Utility Maximizing Condition
Definition
MUx/MUy=Px/Py
Supporting users have an ad free experience!