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21 Cards in this Set
- Front
- Back
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The Law of Demand |
When the price of a product goes up, demand for that product goes down. When the price of a good goes down, demand for that product goes up. |
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Substitutes |
When the price of Good A goes up, the demand for Good B increases. Has a constant MRS |
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Compliments |
When the price of Good A goes up, the demand for Good B decreases. Has a right angled MRS |
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Normal Goods |
When income level increases, demand for that product increases |
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Inferior Goods |
When income level increases, demand for that good decreases. |
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Law of Diminishing Marginal Benefit |
The marginal benefit from a single unit decreases with each consecutive unit. The first unit has more benefit than the second. |
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Budget Line |
All the combinations of 2 goods that a consumer can afford to buy |
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Indifference Curve |
All the combinations of 2 goods that a consumer gets the same utility from |
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Biggest Assumption of Supply and Demand Curve Model |
The market is roughly competitive |
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Competitive Market |
Individual buyers and sellers have a negligible effect/influence on price |
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Completely Inelastic Demand |
Consumers will buy a fixed quantity regardless of the price (Straight up demand curve) |
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Completely Elastic Demand |
Consumers will buy as many of a good as they can possibly get at a certain price but wont buy any at a higher price (Straight sideways demand curve) |
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Marginal Rate of Substitution |
The rate of how much of Good A you are will to give up to get one more Good B. It is the slope of the Indifference Curve. |
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Bads |
A good for which less is preferred rather than more. |
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Increased Interest Rates |
Savings becomes more attractive, borrowing becomes more expensive. |
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Decreases Interest Rates |
Saving becomes less attractive, borrowing becomes cheaper. |
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Probability |
Likelihood that a given outcome will occur |
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Expected Value |
Each outcome value multiplied by its probability |
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Expected Return |
Return that asset should earn on average. |
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Actual Return |
Return that an asset actually earns. |
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Price of Risk |
Extra risk that an investor must incur to enjoy a higher expected return. |
