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Define budget constraint

defined by the income available for consumption and the prices that a consumer faces. This constraint defines the feasible set of consumption choices facing a consumer


define consumption bundles

quantities of various goods or services that a consumer might consume


define disposable income

personal income after the payment of tax obligations


define Engel's Law

as disposable income of a consumer increases, the percentage of income spent for food decreases if all other factors remain constant


define indifference curve

a graph of the locus of consumption bundles that provide a consumer a given level of satisfaction


define law of diminishing marginal utility

marginal utility declines as more of a good or service is consumed during a specific period of time


define marginal rate of substitution

the rate of exchange of pairs of consumption goods or services to leave utility or satisfaction unchanged, or the absolute value of the slope of an indifference curve


define marginal utility

the change to utility or satisfaction as consumption of a good is increased by one unit


define total utility

the total satisfaction derived from consuming a given bundle of goods and services


define utility function

a mathematical or functional representation of the satisfaction derived from consumption of goods or services


define utils

imaginary units of satisfaction derived from consumption of goods or services