6.1 Flashcards
(5 cards)
1
Q
What is a Budget Constraint?
A
Shows possible combinations of two goods a consumer can afford given limited income.
2
Q
What is Total Utility?
A
Satisfaction derived from consumer choices.
3
Q
What is Marginal Utility?
A
Additional satisfaction from consuming one more unit of a good.
4
Q
What is Diminishing Marginal Utility?
A
Each additional unit consumed provides less additional satisfaction than the previous one.
5
Q
What is the Utility Maximization Rule?
A
Choose goods so that the marginal utility per dollar spent is equal for all goods when the budget is exhausted.
