ch 21 terms

Question 1

consumer choice

Answer 1

customers want to max out utility given constraint

Question 2

define inferior good

Answer 2

demand drops when income rises and rises when income drops
instant noodles

Question 3

define normal good

Answer 3

demand rises w income

Question 4

define opportunity cost

Answer 4

how much of one product you give up to gain +1 of the other (pizza vs coke)

Question 5

define utility

Answer 5

happiness or satisfaction of customer

Question 6

marginal rate of substitution definition

Answer 6

change in HAPPINESS when subbing two things according to an individual

Question 7

describe indifference curve

Answer 7

asymptotic line showing happiness levels between two products

Question 8

what does the slope of budget constraint represent

Answer 8

the rate of exchange

Question 9

define perfect substitute

Answer 9

coke vs pepsi
benefit from each others downfall

Question 10

define optimum

Answer 10

point where budget constraint and indifference curve touch

Question 11

define perfect compliment

Answer 11

they rely on each others success to do well
(left vs right shoes)

Question 12

define relative price

Answer 12

substitution rate according to market

Question 13

define relative price

Answer 13

substitution rate according to market

Question 14

define income effect

Answer 14

change in demand resulting from change in real income
(wage increase or price changes)

Question 15

define substitution effect

Answer 15

demand for one good falls when people buy cheaper alternative instead of