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36 Cards in this Set
- Front
- Back
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What are the four P's that directly influence the consumer? |
Product, price, promotion and place |
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Other than the Four P's, what things indirectly influence consumers? |
Politics, culture, economy, Law, technology and competition |
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When we are talking about _____, you know we are talking about income and ability. |
constraints |
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The indifference curve represents... |
A consumers taste |
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What is demand? |
a consumers willingness and ability to pay |
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The indifference curve is also called the... |
utility curve |
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What does the indifference/utility curve show? |
Shows the willingness to pay |
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What three things does consumer opportunity include? |
Prices of the goods and services Amount of goods and services to buy Income |
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Why are consumers forced to make tradeoffs when making purchase decisions? |
Because of scarcity, which means that they have limited resources, but unlimited wants |
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What are the three goals of the consumer? |
Maximize utility, or satisfaction Control variables, goods or services you buy Maximize utility |
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total utility is also known as... |
total benefit |
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What is decreasing marginal utility? |
As you consume more of a good, your additional satisfaction declines |
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What is the formula of marginal utility? |
marginal utility= change in utility / change in x |
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The marginal utility curve is... |
downward sloping |
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The indifference curve is ____ sloping |
downward |
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What is the marginal rate of substitution |
The rate at which people are willing to exchange good x for good y |
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_____ ____ _____ ______ tells you the rate at which you are equally satisfied |
marginal rate of substitution |
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MRS is negative the slope of the... |
indifference curve. |
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Marginal rate of substitution determines the... |
willingness to pay |
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Marginal Rate of Substitution is the ration of... |
marginal utilities of the goods.. |
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What is the formula of the Marginal Rate of substitution? |
MRS= - change in y/ change in x MRS= MUx/ MUy |
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The Budget constraint graph looks at ones... |
ability to pay |
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What is the formula for income? |
M= (Price of good x * Quantity of good x) + (Price of good y * Quantity of good y) |
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If a point lies inside the budget constraint means.. |
Points that lie within the budget constraint simply mean that you could do better. You are not fully utilizing your income |
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If a point lies on the budget constraint curve, it means... |
That you have fully utilized your budget |
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If a point is outside the budget line, .... |
it is unreachable |
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a consumers budget line show... |
all possible commodity bundles that can be purchased at given prices with a fixed money income |
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what is the slope of the budget line? |
Slope of budget line= price of x/ price of y |
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What influence does an increase in income have on the budget line? |
It shifts the budget line to the right, but does not change the slope of the budget line because x/y is the same |
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What influence does a decrease in income have on the budget line? |
It shifts the budget line to the left, but does not change the slope of the budget line because x/y is the same |
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In increase in the price of a good, does what to the budget line? |
It rotates the budget line inward |
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In increase in the price of a good, does what to the budget line? |
It rotates the budget line inward |
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A decrease in the price of a good does what to the budget line? |
It rotates the budget line outward |
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What does utility maximization occur? |
Utility maximization occurs when the indifference curve is just tangent to the budget line |
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If marginal utility of x/price of x is greater than marginal utility of y/price of y, then... |
you should move away from y toward x |
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What is the formula of maximum utility? |
MUx/ Px = MUy/Py |
