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11 Cards in this Set
- Front
- Back
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Utility
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The enjoyment or satisfaction people receive from consuming goods and services
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Marginal utility (MU)
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The change in total utility a person relieves from consuming on additional unit of a good or service
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Law of diminishing marginal utility
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The principle that consumer experience diminishing additional satisfaction as they consume more of a good or service during a given period of time.
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Budget constraint
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The limited amount of income available to consumers to spend on goods and services
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Income effect
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Change in the quantity demanded of a good that results from a change in the purchasing power
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Substitution effect
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The change in the quantity demanded of a good that results from a change in the price making the good more or less expensive relative to other goods, holding constant the effect of price change on consumer purchasing power
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Network externality
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A situation in which the usefulness of a product increases with the number of consumers who use it.
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Behavioral economics
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The study of situations in which people make choices that do not appear to be economically rational.
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Opportunity cost
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The highest valued alternative that must be given up to engage in an activity
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Endowment effect
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The tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it.
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Sunk cost
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A cost that has already been paid and cannot be recovered.
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