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14 Cards in this Set

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 Utility measure of the satisfaction received from possessing or consuming goods and services. used to capture the general concept of happiness/satisfaction Diminishing Marginal Utility the principle that the more of a good that one obtains in a specific period of time, the less is the additional utility yielded by an additional unit of that good. Marginal Utility the extra utility derived from consuming one more unit of a good or service. reflects the difference from one unit to the next Disutility dissatisfaction Total Utility a measure of the total satisfaction derived from consuming a quantity of some good or service. total of units of marginal utility Equimarginal Principle or Consumer Equilibrium to maximize utility, consumers must allocate their scarce incomes among goods so as to equate the marginal utilities per dollar of expenditure on the last unit of each good purchased.1~(MU)/P= 2~(MU)/P Consumer Surplus the difference between what the consumer is willing and able to pay for a unit of a good and the price that the consumer actually has to pay Sustitution Effect indicates that following a decrease in the price of a good or servicem an individual will puchace more of the now less expensive good and less o the other goods Income Effect the income effect of a price change indicates that an individual's income can buy more of all goods when the price og one good declines, everything else held constant Indifferent lacking any preference Indifference Curve a curve showing all combinations of two goods that the consumer is indifferent among. WILLING TO BUY Indifference Map a complete set of indifference curves Budget Line a line showing all the combinations of goods that can be purchased with a given level of income. ABLE TO BUY Indifference/Demand Curve Equilibrium occurs at the point where the budget line just touches, or is tangentto, an indifference curve