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### 11 Cards in this Set

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 Diamond-water paradox the observation that those things that have the greatest value in use sometimes have little value in exchange and those things that have little value in use sometimes have the greatest value in exchange Utility a measure of the satisfaction, happiness or benefit that results from the consumption of a good Util an artificial construct used to measure utility Total utility the total satisfaction a person recieves from consuming a particular quantity of a good Marginal utility the additional utility a person recieves from consuming an additional unit of a particular good Law of diminishing marginal utility for a given time period, the marginal (additional) utility or satisfaction gained by consuming equal successive units of a good wil decline as the amount consumed increases Interperseonal utility comparison comparing the utility one person receives froom a good, service or activity with the utility another person receives from the same good, service or activity Consumer equilibrium occurs when a person has spent all income and the marginal utilities per dollar spent on each good purchased are equal MUa/Pa = MUb/Pb = ... MUz/Pz where the letters a-z represent all the goods a person buys Real income income adjusted for price changes. a person has more (less) real income as the price of a good falls (rises), ceteris paribus Substitution effect the portion of the change in the quantity demanded of a good that is attributal to a change in its relative price Income effect the portion of the change in the quantity demanded of a good that is attributal to a change in real income (brought about by a change in absolute price)