Choice

Question 1

Optimal Choice

Answer 1

MRS=MRT

Question 2

Feasible Set

Answer 2

All that is attainable

Question 3

What is a budget line, What are the constraints?

Answer 3

Frontier of the budget set, slope is MRT (price ratio)
Constrained by income and prices of the goods

Question 4

Indefference curves

Answer 4

curve on a graph representing a combination in a bundle of goods, consumer gets the same utility from any combo in the bundle. Convex shape

Question 5

3 Axioms of economic behavior, explain each

Answer 5

Completeness - given two alternatives the decision maker can compare the alternatives, and will weakly prefer one of the alternatives to the other, or will be indifferent

Question 6

MRS

Answer 6

Marginal Rate of Substitution
How much someone is willing to give up of one good in order to attain an additional unit of another good while maintaining the same level of utility

Question 7

MRT

Answer 7

Marginal Rate of Transformation
How much someone has to give up of one good in order to gain an additional unit of the other

Question 8

Comparative Statics

Answer 8

Comparing the new equilibrium to the old equilibrium

Question 9

Budget set

Answer 9

Consumer’s feasible set
What is attainable

Question 10

Normal Good

Answer 10

If income increases, demand increases

Question 11

Inferior Good

Answer 11

If income increases, demand decreases