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22 Cards in this Set
- Front
- Back
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the Indifference Curve, what it demonstrates, and how it is derived
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A graph that of the locus of consumption bundles that provide a consumer a given level of satisfaction; Slope= Marginal Rate of Substitutions (MRS),
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the budget line, what it demonstrates, and how it is derived
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A graph depicting a budget constraint
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the consumer demand curve, what it demonstrates, and how it is derived
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A schedule that shows how many units of a good the consumer will purchase at different prices for that good during some specified time in a specified market, all other factors constant
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describe the MRS
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Rate at which one good (resource) can be substituted for another at the margin without changing satisfaction (output)
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When determining price elasticity of demand, are you familiar with the relationship encountered when demonstrating an Elastic response
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The percentage change in quantity demanded exceeds the percentage change in price
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describe what Cross Price Elasticity measures?
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Measures the unity or close relation between a quantity of one commodity and price of another commodity
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Marginal Utility, what it demonstrates, and how it is derived
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The change in utility derived from an increase in consumption of a particular good; as the value rises the consumption decreases?
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determine differences between a Normal good and Inferior good based on the change in Income
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• Inferior goods- goods for which a rise (fall) in income will lead to decreased (increased) consumption.
• Normal Goods- goods for which a rise (fall) in income will lead to increased (decreased) consumption. |
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When total utility is at its maximum, Marginal Utility is zero.
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Yes
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categorize goods based on Cross Price Elasticity coefficients
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• If the coefficient were to indicate a negative cross elasticity we could say that the two commodities were complementary of each other.
• If the coefficient was positive, the commodities would be considered close substitutes. |
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familiar with Alfred Marshal?
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Invented the concept of elasticity (British Economist)
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Are you familiar with Engel’s Law?
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As disposable income of a consumer increases, the percentage of income for food decreases
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Can you list a good that would be considered inferior vs. normal? (Example: Lard, Lobster, Steak)
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Inferior- Margarine vs. Butter, riding on the bus vs. own car, take a taxi
Normal- gasoline, housing, steak |
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Do you remember what the Law of Demand Asserted?
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Relates to a price paid for a given quantity at a certain time and place.
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Do you know the definition of ceteris paribus when used in economic literature?
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The assumption that all other factors that might affect demand are held constant during the time period. This term is the Latin Phrase most often used by economists
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Are you familiar with the criteria that distinguish differences between a change in quantity demanded vs. a change or shift in demand?
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• A change in quantity demanded occurs when price and quantity are changing resulting in movement from one point to another point along the demand curve.
• A change in demand results from a shift of the entire demand schedule without influence from price. |
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Do you know why the demand curve is considered to be downward sloping?
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As individuals consume more goods, utility tends to decline, and thus the downward slope of the demand curve would indicate that additional units are worth less to the consumer
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A straight-line demand curve that demonstrates the “law of demand” has the following properties; constant slope and decreasing own-price elasticity.
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Yes
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Can you state the Law of Diminishing Marginal Utility?
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Is the change in utility derived from an increase in consumption of a particular good.
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Can you describe the process by which a market demand curve is derived?
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A Market Demand Curve results from the Horizontal summation of all individual demand curves of that good.
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Can you define Budget Constraint?
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Income available for consumption and the price consumer’s face, which results in constraint of consumption choices facing a consumer.
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From a graphical standpoint, can you identify budget constraint?
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Total disposable income delegate choices consumers must make regarding purchases of goods.
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