Chapter 3

Question 1

Consumption Bundles

Answer 1

The complete list of the goods and services that are involved in the choice problem

Question 2

Strictly Preferred

Answer 2

When a consumer definitely wants one bundle over another

Question 3

Indifferent

Answer 3

The consumer would be just as satisfied consuming one bundle over another

Question 4

Weakly Prefers

Answer 4

When a good is at least as good as another

Question 5

Complete Preferences

Answer 5

We assume that any two bundles can be compared

Question 6

Reflexive Preferences

Answer 6

We assume that any bundle is as good as itself

Question 7

Transitive Preferences

Answer 7

We can rank the consumers preferences

Question 8

Weakly Preferred Set

Answer 8

All of the consumption bundles that are weakly preferred to the bundle (x1,x2)

Question 9

Indifference Curve

Answer 9

All the bundles to which the consumer is just indifferent to (x1,x2).

Question 10

Perfect Substitutes

Answer 10

When a consumer is willing to substitute one good for another at a constant rate.

Question 11

Perfect Complements

Answer 11

goods that are always consumed together in fixed proportions

Question 12

Bad

Answer 12

A commodity that the consumer doesn’t like

Question 13

Neutral Good

Answer 13

If the consumer doesn’t care about it one way or the other

Question 14

Satiation Point

Answer 14

The best overall bundle for the consumer, the closer the consumer is to that bundle the better off he is.

Question 15

Discrete Good

Answer 15

A good that is only available in integer amounts

Question 16

Monotonicity

Answer 16

The assumption that more of a good is better

Question 17

Convex Set

Answer 17

Averages are preferred to extremes

Question 18

Strictly Convexity

Answer 18

The weighted average of two goods is strictly preferred to the two extreme bundles

Question 19

Marginal Rate of Substitution

Answer 19

The Slope of an indifference curve,
The rate at which the consumer is just willing to substitute one good for the other.

Also called “marginal willingness to pay”.