Chapter 5 - Demand
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8 Terms
1
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Consumer surplus
________: difference between a buyers reservation price for a product and the price actually paid.
2
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Horizontal addition
________: process of adding individual demand curves to get the market demand curve.
3
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Law of demand
people do less of what they want to do as the cost of doing it rises
4
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Marginal utility
additional utility gained from consuming an additional unit of a good
5
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Law of diminishing marginal utility
tendency for the additional utility gained from consuming an additional unit of a good to diminish as consumption increases beyond some point
6
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Rational spending rule
spending should be allocated across goods so that the marginal utility per dollar is the same for each good
7
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Horizontal addition
process of adding individual demand curves to get the market demand curve
8
New cards
Consumer surplus
difference between a buyers reservation price for a product and the price actually paid