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8 Cards in this Set
- Front
- Back
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Total Utility
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the number of units of utility that a consumer gains from consuming a given quantity of a good, service, or activity during a particular time period.
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Marginal Utility
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the amount by which total utility rises with consumption of an additional unit of a good, service, or activity, all other things unchanged.
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Law of Diminishing Marginal Utility
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the tendency of marginal utility to decline beyond some level of consumption during a period.
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Budget Constraint
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restriction that total spending cannot exceed the budget available
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Utility Maximizing Condition
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states that utility is maximized when total outlays equal the budget available and when the ratios of marginal utilities to prices are equal for all goods and services
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Substitution Effect
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the change in a consumers consumption of a good in response to an income-compensated price change.
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Income Effect
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the change in consumption of a good resulting from the implicit change in income because of a price change.
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Income Compensated Price Change
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an imaginary exercise in which we assume that when the price of a good or service changes, the consumers income is adjusted so that he or she has just enough to purchase the original combination of goods and services at the new set of prices.
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