Midterm 1 Flashcards
1
Q
Why does marginal utility diminish?
A
Because as a consumer consumes more of a good the additional satisfaction from consuming each extra unit decreases.
2
Q
What are the four assumptions
A
Completeness
Transativity
Non-Satiation
Diminishing marginal rate of substitution
3
Q
What is an indifference curve
A
An indifference curve represents all combinations of goods that provide the same level of satisfaction.
