Term
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Definition
| total satisfaction a consumer derives from consumption; it could refer to either the total utility of consuming a particular good or the total utility of all consumption |
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Definition
| Change in total utility derived from a 1-unit change in consumption of a good |
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| Law of Diminishing Marginal Utility |
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Definition
| More of a good a person consumes per period, the smaller the increase in total utility from consuming 1 more unit |
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Term
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Definition
| condition in which an indiviual consumer's budget is spent and the last dollar spent on each good yields the same marginal utility; therefore, utility is maximized |
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Definition
| the dollar value of the marginal utility derived from consuming each addition unit of a good |
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Term
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Definition
| difference between the max amount that a consumer willing to pay for a given quantity of a good and what the consumer actually pays |
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Definition
| shows all combinations of goods that provide the consumer with the same satisfaction or the same utility (the consumer finds all combos on a curve equally preferred) |
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Term
| Marginal Rate of Substitution |
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Definition
| The number of "A" you are willing to give up to get more of "B", neither gaining nor losing utility in the process |
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Term
| The Law of Diminishing Rate of Substitution |
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Definition
| States that as your consumption of "A" increases, the amount of "B" you are willing to give up to get another "A" declines. |
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Term
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Definition
| A graphical rep of a consumer's taste. Each curve reflects a different level of utility. |
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Term
| Properties of Indifference Curve |
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Definition
1 - A particular indifference curve reflects a constant level of utility, so the consumer is indifferent about all consumption combos along a given curve, combos are equally attractive
2 - if total utility is to remain constant, an increase in the consumption of 1 good must be offset by the decrease in consumption of the other good, so each indifference curve slopes downward
3 - because of the law of diminishing marginal rate of substitution, indifference curves bow toward the origin
4 - higher indifference curvers represent higher levels of utility
5 - indifference curvers do not intersect |
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Term
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Definition
| Depicts all possible combos given the object's prices and your budget |
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Definition
| You can achieve this and get the most of your money by spending all of it. When the indifference curve is tangent to the budget line (spending whole budget). |
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Definition
| Max price at which he or she will buy that good |
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Definition
| The lowest price at which he or she is willing to sell a good |
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Term
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Definition
| Opportunity cost of resources employed by a firm that takes the form of cash payments |
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Term
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Definition
| Firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment |
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Term
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Definition
| Firm's total revenue minus its explicit and implicit costs |
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Definition
| Accounting profit earned when all resources earn their opportunity cost |
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Term
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Definition
| Total revenue minus explicit costs |
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Term
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Definition
| any resource that can be varied in the short run to increase or decrease production |
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Term
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Definition
| Any resource that cannot be varied in the short run (machines) |
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Term
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Definition
| Period during which at least one of the firm's resources are fixed |
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