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9 Cards in this Set
- Front
- Back
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A consumer optimum is characterized by |
the marginal rate of substitution equal to the ratio of the prices of the two goods |
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Bill ate four hot dogs at the baseball game. The first one tasted best, but he found that as he ate more hot dogs the amount of extra satisfaction he was receiving was beginning to fall. This would demonstrate |
the law of diminishing utility |
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Utility analysis is the analysis of |
consumer decision making based on utility maximization |
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Suppose that a consumer is at an optimum consuming X and Y. If the price of X falls, then to get to a new equilibrium the consumer must |
purchase more X |
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The marginal rate of substitution is measured along |
a given indifference curve |
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As people consume more and more of a particular good or service, we can predict that |
the marginal utility of each additional good consumed will fall and total utility will increase, but more slowly than before |
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The campus pizzeria sells a large pizza for $14. When you buy a second large pizza, however, it’s price is only $10. How does this relate to marginal utility? |
marginal utility is the additional satisfaction from additional units of the good |
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What is the difference between total utility and marginal utility? |
total utility is the total amount of satisfaction derived from consuming a certain amount of a good while marginal utility is the additional satisfaction gained from consuming an additional unit of the good |
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Why is the price of diamonds usually so much higher than the price of water even though people cannot survive long without water? |
Marginal utility, not total utility, determines how much |
