consumer theory

Question 1

budget line

Answer 1

p1x1+p2x2=m

Question 2

feasible set

Answer 2

set of all feasible consumption bundles
set that contains all baskets of goods that cost no more than m dollars
i.e. the cost of all feasible sets should not exceed budget

Question 3

consumer’s budget constraint

Answer 3

p1x1+p2x2≤m

Question 4

consumer’s problem

Answer 4

pick a point on F (set of all feasible bundles) that maximizes utility and doesn’t exceed a fixed income

Question 5

indifference curve

Answer 5

set of consumption baskets that yield the same utility

Question 6

slope of the indifference curve represents…

Answer 6

consumer’s marginal rate of substitution