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11 Cards in this Set
- Front
- Back
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Behavioral Economics |
The study of situations in which people make choices that do not appear to be economically rational. |
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Budget Constraint |
The limited amount of income available to consumers to spend on goods and services.
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Endowment Effect |
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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Income Effect |
The change in the quantity demanded of a good that results from the effect of a change in good's price on consumers' purchasing power, ceteris paribus. |
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Law of Diminishing Marginal Utility |
The principle that consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time. |
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Marginal Utility (MU) |
The change in total utility a person receives from consuming one additional unit of a good or service.
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Network Externality |
A situation in which the usefulness of a product increases with the number of consumers who use it. |
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Opportunity Cost |
The highest-valued alternative that must be given up to engage in an activity. |
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Substitution Effect |
The change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods that are substitutes. |
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Sunk Cost |
A cost that has already been paid and cannot be recovered. |
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Utility |
The enjoyment or satisfaction people receive from consuming goods and services. |
