Consumer Choice and Demand Flashcards
Chapter 6 Review
1
Q
law of diminishing marginal utility
A
the more of a good a person consumes per period, the smaller the increase in total utility from consuming one more unit, other things constant.
2
Q
consumer equilibrium
A
the condition in which an individual consumer’s budget is exhausted and the last dollar spent on each good yields the same marginal utility; therefore, utility is maximized.
3
Q
Maximize utility equation
A
MUp/Pp = MUm/Pm
4
Q
marginal valuation
A
the dollar value of the marginal utility derived from consuming each additional unit of a good.
5
Q
consumer surplus
A
the difference between the most a consumer would pay for a given quantity of a good and what the consumer actually pays.