Test 1 pt.2 Flashcards
With limited resources, we make ______ choices. Need to make more _____ choices.
less
RATIONAL
any point inside the budget constraint mean you are _______.
closer to 0 means ______
saving
MORE savings
Outside the budget constraint mean you are in ______
debt (living a life we cannot afford)
when your budget INCREASES, your budget constraint shifts to
the RIGHT
when your budget DECREASES, your budget constraint shifts to
the LEFT (less choices)
what is the indifference curve?
- Takes place in our mind
- the consumer has no preference for any good, because all the goods have the same level of satisfaction or utility to the consumer.
The 5 assumptions of the indifference curve
- completeness of preference
- transitivity of preference
- non-satisfaction (more is better)
- Diminishing marginal rate of substitute
- continuous preferences
inflation causes
-less choices
- poorer
- less satisfied
- purchasing power decreases
if only one price changes, then there is a _________ on the budget constraint
rotation
a set of indifference cures is called ____
an indifference map (the higher the indifference curve the better)
every time you make a choice will give you satisfaction but the more you get it the less satisfaction
diminishing returns
(The FIRST choice always gives you the MOST satisfaction.)
Constant returns
same level of satisfaction every time (brushing teeth, coming to school)
individuals would prefer the midpoint because it gives you _____
a good combination of x and y
law of diminishing marginal utility
As More tacos is consumed, the satisfaction goes increasing but a diminishing rate.
Constant returns - buying
Increasing returns - buying
soap
land
