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21 Cards in this Set

  • Front
  • Back
Basic Assumptions about Preferences
Completeness, Transitivity, More is better then less
a person will be satisfied with either basket
if consumer prefers Porshe to Cadillac and Cadillace to Chevrolet then Porsche is preferred to Chevrolet
Consumers always prefer more to less
Indifference Curve
curve representing all combos of market baskets that provide a consumer with the same level of satisfaction (preference)
indifference map
graph containg a set of indifference curves showing the market baskets among which the consumer is indifferent
maximum amount of a good that a consumer is willing to give up to obtain one additional unit of another good
Budget constraints
constraints that consumers face as a reult of limited incomes
budget line
all combos of goods for which the total amount of money spent is equal to income
marginal benefit
benefit from the consumption of one additional unit of a good
marginal cost
cost of one additional unit of a good
marginal utility
additional satisfaction obtained from consuming one additional unit of a good
equal marginal principle
principle that utility is maximized when the consumer has equilized the marginal utility per dollar of expenditure across all goods
individual demand curve
curve relating the quantity of a good that a single consumer will buy to its price
substitution effect
change in consumption of a good associated with a change in its price, with the level of utility held constant
income effect
change in consuption of one good reulting form an increase in purchasing power, with relative prices held constant
consumer surplus
difference between what a consumer is willing to pay for a good and the amount actually paid
production function
function showing the highest output that a firm can produce for every specified combination of outputs
curve showing all possible combinations of inputs that yield the same output
isoquant map
graph combining a number of isoquants, used to describe production function
isocost line
graph showing all possible combinations of labor and capital that can be purchased for a given total cost.