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15 Cards in this Set
- Front
- Back
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Utility
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the satisfactin derived from the fulfillment of wants
measured in utils |
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Total Utility
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total amount of satisfaction derived from the consumption of a particular quantity of a commodity
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Marginal utility
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extra satisfaction derived from the consumption of an additional or marginal unit of a commodity
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Law of diminishing marginal utility
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the principle that marginal utility declines as consumer acquires additionl units of a given product
*also helps explain the law of demand as well as the price elasticity of demand |
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Consumers exhibit ratinal behavior
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= utility maximing behavior
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utility-maximizing rule
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consumer should his or her money income such that the last dollar spent on each commodity yields the same amount of marginal utility
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law of diminshing maginal utility 2 things
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-MU falls as quantity rises
-TU rises as Q at a decreaing rate |
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All income is spent and MUa/Pa > MUb/...
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then buy more A and less B
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All income is spent MUa/Pa < MUb/Pb
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buy less A and more B
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Cardinal utility
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satisfaction derived from consumption and assumes utiltiy can be both quantified adn measured
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Ordinal utility
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satisfaction derived from consumption but only assumes that individuals are able to rank or choose among alternative commodity bundles
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Total Money Income
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=total consumer expenditure
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The Budget line equation
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Y = M/Py-Px/PyX
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Indifference curve
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through a commodity bundle of A is a line drawn through all commodity bundles that the consumer considers to be equally satisfying in relation to commodity bundle A
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Marginal rate of substitution(MRS)
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refers to the slope of the indifference curve
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