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25 Cards in this Set
- Front
- Back
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Decide how much to consume of each available product, given income & prices
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Consumers
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Economic Agents who decide how much to produce given its resources
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Firms
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Relationship of willingness to buy
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Demand Function
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Measure of sensitivity of demand to changes in price
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Elasticity
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When you totally satisfy both the supplier and cunsumer
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Market Equilibrium
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When |E| = 1
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Unitary Elasticity
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When |E| greater than 1
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Elastic
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When |E| is less than 1
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Inelastic
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Formulate a theory of individual behavior
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Consumer theory
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What individuals want
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Consumer preferences
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What individuals can do
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Budget Constraints
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What individuals can actually do
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Consumer Choice
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Showing the indifference of two products
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Utility
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amount of one good a consumer is willing to give up for one more of the other
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Marginal Rate os Substitution
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Where MRS is not equal to the slope
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Corner Solution
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relates quantity of a good consumed compared to income
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Engel Curve
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Change in consumption of a good associated with a change in its price, with level of utility held constant
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Substitution Effect
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change in consumption of a good resulting from increase in purchasing power with relative prices held constant
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Income Effect
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when the income effect is so strong the total effect ends up negative (like irish potato famine)
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Giffen Goods
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Curve relating the quantity of a good that all consumers in a market will have to buy, to its price
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Market Demand Curve
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Difference between what a consumer is willing to pay for a good, and the amount actually paid
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Consumer Surplus
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If increase of price of one leads to increase in quantity demanded of the other
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Substitutes
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if increase in price of one good leads to decrease in quantity demanded of the other
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Complemets
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Curve tracing the utility-maximizing combinations of hte two goods as the price of one changes
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Price Consumption Curve
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Curve that relates the quantity of a good that a single consumer will buy to its price
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Individual Demand Curve
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