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.

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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.

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3
Q

Maximize utility equation

A

MUp/Pp = MUm/Pm

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4
Q

marginal valuation

A

the dollar value of the marginal utility derived from consuming each additional unit of a good.

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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.

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