Indifference Curves Flashcards
1
Q
What do indifference curves show?
A
All possible combinations of goods that give the same utility
2
Q
What is the marginal rate of substitution?
A
The slope of the indifference curve, representing the trade-offs that the individual faces
3
Q
What does an indifference curve look like on a graph?
A
The further from the origin, the more utility will be gained from the choice
A smooth, downward sloping, convex curve on a graph,
4
Q
What is the economic cost of an action?
A
economic cost = monetary costs + subjective costs
Where economic costs are used to compare actions, monetary costs are what is paid for (such as materials), and subjective costs are what is used but not paid for (such as effort)
5
Q
When is economic rent received?
A
When the benefit outweighs the economic cost
