Consumer Business Flashcards
Ceteris Paribus
All other things being equal
Consumer Equilibrium
the state where a consumer achieves maximum satisfaction from their consumption of goods and services, given their budget constraints and the prices of those goods.
Consumer Surplus
the difference between what a consumer is willing to pay for a product and what they actually pay
Total Utility
The overall satisfaction a consumer receives from consuming a good or service.
Utility Function
measure the preferences consumers apply to their consumption of goods and services.
Utils
A hypothetical unit of satisfaction used to quantify total utility.
Cardinal Measure
A measurement that uses numbers to quantify something, such as utility, satisfaction, or pleasure.
Cardinal Utility
A way to quantify utility, which is the amount of satisfaction a person gets from a product or service.
Ordinal Measurement
a way to rank objects or events based on their relative position and characteristics.
Marginal Utility
The change in total utility from consuming one more unit of a good or service.
Law Of Diminishing Marginal Utility
The additional satisfaction from consuming a good decreases as the amount consumed increases.
Marginal Rate Of Substitution
The rate at which a consumer will change one good for another while maintaining the same level of satisfaction.
Iso-Utility Curve
A graph that shows the combinations of goods that provide the same level of satisfaction to a consumer.
Price-Consumption Curve
The line that connects the points of tendency between the budget constraint and the iso-utility curve as the price of one of the goods changes
Budget Constraint
Defines the feasible set of consumption choices facing a consumer. This constraint depends upon the prices of goods in question and the income available to a consumer.
Engel’s Law
an economic principle that states that as a household’s income increases, the percentage of their income spent on food decreases.
Marginal Utility Formula
change in utility/change in items
