Microeconomics: Consumers and Incentives

These flashcards cover essential vocabulary and concepts in microeconomics, particularly focusing on consumer behavior, demand theory, and elasticities.

Buyer’s Problem

The three components that influence a buyer's decisions: preferences, prices, and budget.

Consumer Surplus

The difference between the price a buyer is willing to pay for a good and the price they actually pay.

Demand Curve

A graphical representation that shows the relationship between price and quantity demanded.

Elasticity

A measure of how responsive one variable is to changes in another variable.

Marginal Decision Making

The process of making decisions based on the additional benefits and costs of an action.

Budget Constraint

The limits on an individual's consumption choices due to their income and the prices of goods.

Opportunity Cost

The loss of potential gain when choosing one alternative over another.

Total Revenue

The total receipts from sales of goods or services, calculated as price times quantity sold.

Price Elasticity of Demand

The percentage change in quantity demanded resulting from a percentage change in price.

Cross-Price Elasticity of Demand

A measure of how much the quantity demanded of one good responds to a change in the price of another good.

Income Elasticity of Demand

The measure of how much the quantity demanded of a good changes as consumer income changes.