Flashcards in Chapter 8 Deck (11):
Refers to the level of satisfaction or pleasure that people receive from their choices.
The total amount of satisfaction one receives through the consumption of a certain quantity of a good. The most common pattern of total utility is that
consuming additional goods leads to greater total utility.
marginal rate of substitution
The rate at which a person is willing to trade one good for another so that utility will remain the same.
The additional utility provided by one additional unit of consumption of a good. The most common pattern for marginal utility is diminishing marginal utility.
diminishing marginal utility
Refers to the situation whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit.
Shows combinations of goods that provide an equal level of utility or satisfaction.
Extreme case of indifference curve. Two goods are perfect substitutes if the marginal rate of substitution between them is constant.
Extreme case of indifference curve. Two goods are perfect complements when a person only cares about consuming two goods in a specific proportion.
Occurs when a good becomes more expensive and people seek out substitutes.
Used to measure one’s own utility.