Chapter 10 Flashcards
1
Q
Utility
A
the enjoyment people get from consuming a good
2
Q
Marginal utility
A
change in total utility when consuming one additional unit of a good
3
Q
Law of diminishing marginal utility
A
Diminishing satisfaction as they consume more of a good over a period of time
4
Q
Budget constraint
A
Limited amount of income available to spend on goods
5
Q
Income effect
A
Change of price affects the consumers purchasing power
6
Q
Substitution effect
A
Change in quantity demanded of a good means a change in price making the good more or less expensive
7
Q
Can utility be measured?
A
No
8
Q
Indifference curve
A
A curve showing the combinations of consumption bundles that give consumers the same utility
9
Q
Marginal rate of substitution
A
The rate a consumer would be willing to trade off one good for another
