Ch 3 Preferences

Question 1

Consumption bundles

Answer 1

Complete list of goods and services involved in the choice problem

Question 2

Strictly preferred

Answer 2

Definitely wants one bundle over another

Question 3

Indifference

Answer 3

Two bundles give the same value, consumer exhibits same behavior

Question 4

Weakly prefers

Answer 4

Prefers or is indifferent between the two bundles

Question 5

Assumptions about presences

Answer 5

Complete (all comparable)
Reflexive (at least as good as themselves)
Transitive

Question 6

Indifference curves

Answer 6

Graphical representation of consumer preferences

Question 7

Perfect substitutes

Answer 7

Consumer willing to substitute one good for another at a constant rate

Question 8

Perfect complements

Answer 8

Goods always consumed together in fixed proportions

L shaped indifference curve

Question 9

Bad

Answer 9

Commodity that the consumer doesn’t like

Question 10

Neutral good

Answer 10

Consumer indifferent about good

Question 11

Satiation

Answer 11

Indifference curves surround the point of satiation

Question 12

Discrete good

Answer 12

Only available in integer amounts

Question 13

Monotonicity

Answer 13

More is better (goods, not bads)

Implies negative slope

Question 14

Marginal rate of substitution

Answer 14

Rate at which one good is swapped for another

Question 15

Diminishing MRS

Answer 15

As the amount of one good increases, they are more willing to give up that good in order to have good two