Utility Maximization in Consumer Behavior

These flashcards cover key vocabulary terms related to utility maximization and consumer behavior based on the provided lecture notes.

Utility

Satisfaction or pleasure derived from consuming goods and services.

Marginal Utility

The additional satisfaction gained from consuming one more unit of a good or service.

Diminishing Marginal Utility

The principle that each additional unit consumed adds less total utility than the previous unit.

Consumption Bundle

The combination of goods and services purchased by a consumer.

Budget Constraint

A limitation on the consumption choices of a consumer due to limited resources and income.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Utility Function

A mathematical representation showing the relationship between utility and the quantity of goods consumed.

Marginal Utility per Dollar

The additional utility gained from spending one more dollar on a good or service.

Optimal Consumption Bundle

The combination of goods and services that maximizes a consumer's total utility given their budget constraint.

Marginal Analysis

A method of comparing the additional benefits of an action to its additional costs.

Consumer Choice

The decision-making process by which consumers determine what goods and services to purchase.

Total Utility

The overall satisfaction derived from consuming a certain quantity of goods and services.

Price Elasticity of Demand

The responsiveness of the quantity demanded of a good to a change in its price.

Marginal Cost

The cost of producing one more unit of a good or service.

Expenditure

The amount of money spent on goods and services.