10/18 notes

Question 1

how does a demand supply graph look when the world economy is stable

Answer 1

demand curve is downward slopping and supply is upward

Question 2

what does theory of the consumer study

Answer 2

how ppl decide what to spend on their money on based on their preferences and budget constraints

Question 3

what does understanding help with theory of the consumer

Answer 3

understanding helps shape the overall economy

Question 4

what is theory of the consumer based on

Answer 4

a number of assumptions about human nature

Question 5

what does theory of the firm focus on

Answer 5

focuses on determination of goods, outputs, and income distribution in markets through supply and demand

Question 6

what does theory of the firm state

Answer 6

that a firm exists and makes decisions to maximize profits

Question 7

what is m

Answer 7

marginal

Question 8

what is U

Answer 8

utility

Question 9

utility

Answer 9

term used to determine the worth or value of a good or service

Question 10

MUx=

Answer 10

change in U/change in x

Question 11

MUy=

Answer 11

change in U/change in y

Question 12

law of diminishing utility

Answer 12

Principle that consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time

Question 13

budget constraint

Answer 13

limited amount of income available to consumers to spend on goods or services

Question 14

what is

MUx/Px = MUy/Py

Answer 14

condition that states the marginal utility per dollar spent must be the same for both goods

Question 15

rule to maximize

Answer 15

MUx/Px = MUy/Py