Chapter 7: Consumer Choices Flashcards
Opportunity Cost
The cost of not doing something, because we did something else instead. Shifting of resources.
Substitution Effect
Price changes and consumers have incentive to consume less of a good with higher price, more of a good with lower price
Income Effect
Higher price means the buying power of income has been reduced, which leads to buying less of the good
Value
Personal biases and subjective beliefs
Use-Value
Human material production should be directed toward creation of things that benefit human beings (be thoughtful, not wasteful)
Utilitarianism
People maximize pleasure, minimize pain
Cardinal Utility
Objective/quantifiable utility a consumer assigns a product
Ordinal Utility
Subjective utility in the mind of the consumer, not measurable