Utility and Demand

These flashcards cover key concepts related to utility and demand, focusing on consumption choices, total utility, and marginal utility.

Consumption Possibilities

All the things that a consumer can afford to buy.

Budget Line

A graphical representation showing the limit of a consumer's consumption possibilities based on their income and the prices of goods.

Total Utility

The total benefit a person receives from the consumption of goods.

Marginal Utility

The change in total utility that results from a unit increase in the quantity of a good consumed.

Diminishing Marginal Utility

The principle that as a consumer increases the quantity consumed of a good, the additional satisfaction received from each additional unit decreases.

Consumer Equilibrium

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

Preferences

The likes and dislikes of a consumer that influence their consumption choices.

Income Effect

The change in consumption resulting from a change in a consumer's income.

Price Effect

The change in consumption resulting from a change in the price of a good.

Utility-Maximizing Choice

The choice that maximizes total utility given the budget constraints.