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UNI Fall 2023 > Microecon chapter 6 > Flashcards

Microecon chapter 6 Flashcards

1
Q

Preference

A

What you like / don’t like

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2
Q

Utility

A

Benefit / satisfaction from consuming a good or service

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3
Q

Total utility and quantity relation

A

Positive
low level => high increase
high level -> low increase

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4
Q

Marginal utility and quantity relation

A

Negative

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5
Q

Marginal utility formula

A

ΔTU/ΔQ = ΔTU/1

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6
Q

How to maximize total utility

A

Spreadsheet solution

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7
Q

Consumer equilibrium

A

Highest total utility

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8
Q

Utility maximizing formula

A

MUA/PA = MUB/PB

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9
Q

Income effect (IE)

A

ΔQd as a result of a Δ in real income

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10
Q

Substitution effect

A

ΔQd as a result of a Δ in relative price (always moves in the opposite direction of the ΔP)

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11
Q

Marginal rate of substitution (MRS)

A

Rate at which consumer give up good x for more good y and remain indifferent

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11
Q

Indifference curve (IC)

A

Line that shows the combination of goods among which a consumer is indifferent

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12
Q

Slope of IC

A

Tangent line to IC

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13
Q

Diminishing MRS

A

As we consume more of y, we progressively consume less of x

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14
Q

How to max utility with IC

A

Best affordable point on the highest IC

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15
Q

Income consumption curve (ICC)

A

Shows how purchases react to a ΔI

16
Q

ICC positive slope

A

Normal good

17
Q

ICC negative slope

A

Inferior good

18
Q

Price consumption line

A

How do purchases Δ when P change

19
Q

Giffen goods

A

Product with a positively sloped demand curve

20
Q

Griffen goods characteristics (2)

A
  • Inferior good
  • Takes a large portion of total household expenditure (large income effect)
21
Q

Conspicuous consumption goods

A

Goods with “snob appeal”

22
Q

Paradox of value

A

Why some essentials to life are low price and some non-essentials to life high price?

UNI Fall 2023 (21 decks)

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