Consumer Equilibrium - The Utility Approach

These flashcards cover key vocabulary and concepts from the lecture on consumer equilibrium and utility.

Utility

The degree of satisfaction a consumer derives from the consumption of a good or service.

Total Utility

The total benefit a person receives from the consumption of goods, generally increasing with increased consumption.

Marginal Utility

The change in total utility that results from consuming one additional unit of a good.

Diminishing Marginal Utility

The principle stating that the marginal utility of a good or service eventually declines as more of it is consumed.

Weighted Marginal Utility

The marginal utility divided by the price of a product, used to determine consumer equilibrium.

Consumer Equilibrium

A state where a consumer maximizes total utility, given their budget constraints.

Cardinal Utility

An approach assuming that utility can be measured in numerical units like one, two, three.

Ordinal Utility

An approach that ranks possible combinations of goods based on preference.

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Total Utility Curve

A graphical representation showing the relationship between quantity consumed and total utility.