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10 Cards in this Set
- Front
- Back
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Budget constraint |
The limit on the consumption bundles that a consumer can afford |
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Indifference curve |
A curve that shows consumption bundles that give the consumer the same amount of satisfaction |
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Marginal rate of substitution |
The rate at which a consumer is willing to trade one good for another |
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Perfect substitutes |
Two goods with straight line indifference curved |
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Perfect complements |
Two goods with right angle indifference curves |
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Normal good |
A good for which an increase in income raised the QD |
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Inferior good |
A good for which an increase in income reduces the QD |
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Income effect |
The change in consumption that results when a price change moves the consumer to a higher or lower indifference curve |
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Substitution effect |
The change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution . |
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Giffen good |
A good for which an increase in the price raises the QD |
