Chapter 31 - Indifference Curves And Budget Lines Flashcards

1
Q

Indifference Curves

A

This shows all of the combinations of 2 goods that a consumer equal satisfaction.

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2
Q

Marginal Rate Of Substitution

A

The rate at which a consumer is wiling to substitute one good for another.

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3
Q

Budget Line

A

The combinations of 2 goods that can be purchased with given income and given prices.

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4
Q

Substitution Effect

A

Where, following a price change, a consumer will substitute the cheaper good for the one that now is relatively more expensive.

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5
Q

Income Effect

A

Where following a price change of a good, a consumer has a higher real income and will purchase more of this good.

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6
Q

Giffen Good

A

A type of inferior good where the quantity demanded falls as the price falls and the quantity demanded increases as price increases

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7
Q

The Margin And Decision Making

A

The use of indifference curves and budget lines are relevant examples of how decision-making by individuals is based at the margin.

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