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10 Cards in this Set
- Front
- Back
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Indifference Curves |
A curve that shows consumption bundles that give the consumer the same level of satisfaction |
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Marginal Rate of Substitution |
The rate at which a consumer is willing to trade one good for another |
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Perfect Substitutes |
Two goods with straight-line indifference curves |
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Perfect Compliments |
Two goods with right-angle indifference curves |
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Normal Good |
A good for which an increase in income raises the quantity demanded |
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Inferior Good |
A good for which an increase in income reduces the quantity demanded |
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A consumer chooses consumption of two goods so that: |
The marginal rate of substitution = the relative price |
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Income Effect |
The change in consumption that results when price change moves the consumer to a higher or lower indifference curve |
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Substitution Effect |
The change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution |
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Giffen Good |
A good for which an increase in the price raises the quantity demanded |
