Quiz 5 Flashcards
all the consumption bundles available to a consumer who spends all of their income
budget line
the cost of a consumer’s consumption bundle cannot exceed the consumer’s income
budget constraint
the set of all consumption bundles that are affordable, given a consumer’s income and prevailing prices
consumption possibilities
cost that does not depend on the quantity of output produced. It is the cost of the fixed input.
fixed cost
the time period in which all inputs can be varied
long run
the change in total utility generated by consuming one additional unit of a good or service
marginal utility
a graphical representation showing how marginal utility depends on the quantity of a produce consumed
marginal utility curve
additional utility from spending one more dollar on a product
marginal utility per dollar
the consumption bundle that maximizes the consumer’s total utility given their budget constraint
optimal consumption bundle
when a consumer maximizes utility, the marginal utility per dollar spend must be the same for all products in the consumption bundle
optimal consumption rule
the proposition that each successive unit of a product consumed adds less to total utility than does the previous unit
principle of diminishing marginal utility
the time period in which at least one input is fixed
short-run
a measure of the satisfaction derived from consumption of products
utility (of a consumer)
a unit of utility
util
the distribution of the tax burden
tax incidence
tax that doesn’t depend on the taxpayer’s income
lump-sum tax
losses associated with quantities of output that are greater than or less than the efficient level, as can result from market intervention such as taxes, or from externalities such as pollution
deadweight loss
the resources used (which is a cost) by government to collect the tax, and by taxpayers to pay it, over and above the amount of the tax, as well as to evade it
administrative costs
