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14 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Marginal Rate of Substitution (MRS) |
Maximum amount a consumer is willing to give up to get an additional unit of the other good
MRS= -deltaC/deltaF |
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Perfect Substitutes |
Two goods where the marginal Rate of Substitution of one for the other is constant |
Solution relates to MRS |
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Perfect complements |
Two goods for which the MRS is 0 or infinitive (indifferente curve is a right angle) |
Solution relates to MRS |
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Bads |
Goods for which less is preffered rather than more |
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Utility |
Numerical score for satisfaction of one basket |
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Utility function |
Assigns level of utility |
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Budget line |
All combinations of goods for which the total amount of money spent is equal to income |
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Budget contrains |
Contrains that consumers face as a result of limited income |
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Marginal benefit |
Benefit from the consumption of one additional unit of a good |
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Marginal cost |
Cost of one additional unit of a good |
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Corner solution |
Situation in which the MRS of one good for another in a chosen market basket is not equal to the slop of the budget line |
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Marginal utility (MU) |
Additional satisfaction obtained from consuming one additional unit of good |
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Diminishing marginal utility |
Principle that as more of a good is consumed, the consumption of additional amounts will yield smaller additions in utility |
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Equal marginal principle |
Principle that utility is maximized when the consumer has equalized the marginal utility per dollar of expenditure across all goods |
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