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6 Cards in this Set
- Front
- Back
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optimal combination |
affordable combination that yields highest total utility |
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rational spending rule |
spending should be allocated across goods so that the marginal utility per dollar is the same for each good |
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Law of Demand |
Ppl do less of what they do as the cost of doing it rises |
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nominal price |
absolute price of a good in dollar terms |
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real price |
the dollar price of a good relative to the average dollar price of all other goods |
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Marginal Rate of Substitution (MRS) |
MRS=MU1/MU2 the amt of the good on the y-axis the consumer is willing to give up to compensate for the gain of 1 unite of the good on the x-axis MRS @any pt along an IC is the abs value of the slope of the IC at that point |
