Chapter 8: Utility and Demand

Consumption Choice

The choices you make as a buyer of good and services

Consumer Possibilities

All the things that you can afford to buy

Budget Line

The boundary between those combinations of goods and services that a household can afford to buy and those that it cannot afford.

Consumer Equilibrium

A situation in which a consumer has allocated all of his or her available income in a way that maximizes his or her total utility, given the price of goods and services.

Diminishing Marginal Utility

The Tendency for marginal utility to decrease as the quantity consumed of a good increase

Marginal Utility

The Increase in total utility results from consuming one more unit of a good.

Marginal Utility per dollar

Is the marginal utility from a good that results from spending one more dollar on it.

Neuroeconomics

The study of the activity of the human brain when a person makes an economic decision

Preference

 

A description of the person’s likes and dislikes.

Total Utility

The total benefit that a person gets from the consumption of all the different goods and services.

Utility

The benefit or satisfaction that a person gets from the consumption of goods and services.