econ 100a - Assignment Essays

question

theory of consumer behavior

answer

allocate income, maximize satisfaction:

question

consumer behavior

answer

1. consumer preference 2. budget constraint 3. consumer choice

question

completeness

answer

compare all baskets

question

indifferent

answer

equally satisfied

question

transitivity

answer

A>B>C, therefore A>C

question

indifference curve

answer

represents all combinations of market baskets that provide a consumer with same level of satisfaction. cannot intersect

question

indifference map

answer

contains a set of indifference curves showing the baskets which the consumer think are indifferent

question

MRS

answer

marginal rate of substitution, max amount of good that a consumer is willing to give up in order to obtain one additional unit of another. give up vertical axis for horizontal 1 unit

question

convexity

answer

slopes inwards diminishing marginal rate of substitution, becomes less negative

question

perfect substitutes

answer

mrs is constant slant \

question

perfect complements

answer

mrs is infinite L graph

question

bad

answer

good that is preferred less than more

question

utility

answer

numerical score of satisfaction from a market basket

question

ordinal utility function

answer

ranking baskets from most to least preferred

question

cardinal utility function

answer

HOW MUCH one basket is preferred from another

question

budget constraints

answer

constraints due to limited income

question

budget line

answer

(price of A)(quantity of A)+(price of B)(quantity of B)=Income

question

budget line y-intercept

answer

income/price of B

question

budget line x-intercept

answer

income/price of A

question

income/price change

answer

income - shifts whole line
price - changes steepness

question

max market basket satisfies

answer

if located on budget line and gives consumer most preferred combo

question

maximized marginal rate of substitution

answer

MRS=Pa/Pb

question

marginal benefit

answer

benefit received when consuming one more additional unit

question

marginal cost

answer

cost of one additional good

question

answer

marginal utility, additional satisfaction from consuming another unit of a good

question

substitutes

answer

increase in price of one good leads to a increase in quantity demanded in the other good

question

complements

answer

increase in price of one good leads to a decrease in quantity demanded in the other

question

elasticity

answer

percent change in one variable resulting from a 1% change in the other

question

Ep=

answer

(P/Q)( ∆Q/∆P)

question

infinitely elastic demand

answer

horizontal curve

question

completely inelastic demand

answer

vertical curve

question

Ep >1

answer

elastic, substitute D>P

question

Ep < 1

answer

inelastic, no substitues D<P

question

arc elasticity

answer

elasticity over a range of prices, average

question

cross-price elasticity

answer

elasticity of complements. (P1/Q2)(∆Q2/∆Q1)

question

demand Q=

answer

a-bP

question

supply Q=

answer

c+dP

question

price consumption curve

answer

curve tracing the utility-maximizing combinations of two goods as the price of one changes

question

individual demand curve

answer

curve relating the quantity of a good that a single consumer will buy to its price

question

inferior good

answer

increase in income leads to less consumption of one of the two goods being purchased

question

normal good

answer

a good that consumers demand more of when their incomes increase

question

engel curve

answer

shows the relationship between the quantity demanded of a single good and income, holding prices constant

question

fall in price

answer

buy more that is cheaper than the one that is more expensive, real purchasing power in increased

question

substitution effect

answer

change in consumption of a good associated with a change in its price, utility held constant.

question

income effect

answer

change in consumption of a good resulting from an increase in purchasing power, relatives prices held constant

question

giffen good

answer

demand curve slopes upward cause the (neg) income effect is larger than substitution

question

consumer surplus

answer

difference between what a consumer is willing to pay for a good and the amount they actually paid

question

bandwagon effect

answer

positive shift, trend

question

snob effect

answer

negative shift, consumer wants something that no one has, rarity

question

corner solution

answer

buys all of one good and none of the other, not equal to slope of the budget line

1 of 50

question

theory of consumer behavior

answer

allocate income, maximize satisfaction:

question

consumer behavior

answer

1. consumer preference 2. budget constraint 3. consumer choice

question

completeness

answer

compare all baskets

question

indifferent

answer

equally satisfied

question

transitivity

answer

A>B>C, therefore A>C

question

indifference curve

answer

represents all combinations of market baskets that provide a consumer with same level of satisfaction. cannot intersect

question

indifference map

answer

contains a set of indifference curves showing the baskets which the consumer think are indifferent

question

MRS

answer

marginal rate of substitution, max amount of good that a consumer is willing to give up in order to obtain one additional unit of another. give up vertical axis for horizontal 1 unit

question

convexity

answer

slopes inwards diminishing marginal rate of substitution, becomes less negative

question

perfect substitutes

answer

mrs is constant slant \

question

perfect complements

answer

mrs is infinite L graph

question

bad

answer

good that is preferred less than more

question

utility

answer

numerical score of satisfaction from a market basket

question

ordinal utility function

answer

ranking baskets from most to least preferred

question

cardinal utility function

answer

HOW MUCH one basket is preferred from another

question

budget constraints

answer

constraints due to limited income

question

budget line

answer

(price of A)(quantity of A)+(price of B)(quantity of B)=Income

question

budget line y-intercept

answer

income/price of B

question

budget line x-intercept

answer

income/price of A

question

income/price change

answer

income - shifts whole line
price - changes steepness

question

max market basket satisfies

answer

if located on budget line and gives consumer most preferred combo

question

maximized marginal rate of substitution

answer

MRS=Pa/Pb

question

marginal benefit

answer

benefit received when consuming one more additional unit

question

marginal cost

answer

cost of one additional good

question

answer

marginal utility, additional satisfaction from consuming another unit of a good

question

substitutes

answer

increase in price of one good leads to a increase in quantity demanded in the other good

question

complements

answer

increase in price of one good leads to a decrease in quantity demanded in the other

question

elasticity

answer

percent change in one variable resulting from a 1% change in the other

question

Ep=

answer

(P/Q)( ∆Q/∆P)

question

infinitely elastic demand

answer

horizontal curve

question

completely inelastic demand

answer

vertical curve

question

Ep >1

answer

elastic, substitute D>P

question

Ep < 1

answer

inelastic, no substitues D<P

question

arc elasticity

answer

elasticity over a range of prices, average

question

cross-price elasticity

answer

elasticity of complements. (P1/Q2)(∆Q2/∆Q1)

question

demand Q=

answer

a-bP

question

supply Q=

answer

c+dP

question

price consumption curve

answer

curve tracing the utility-maximizing combinations of two goods as the price of one changes

question

individual demand curve

answer

curve relating the quantity of a good that a single consumer will buy to its price

question

inferior good

answer

increase in income leads to less consumption of one of the two goods being purchased

question

normal good

answer

a good that consumers demand more of when their incomes increase

question

engel curve

answer

shows the relationship between the quantity demanded of a single good and income, holding prices constant

question

fall in price

answer

buy more that is cheaper than the one that is more expensive, real purchasing power in increased

question

substitution effect

answer

change in consumption of a good associated with a change in its price, utility held constant.

question

income effect

answer

change in consumption of a good resulting from an increase in purchasing power, relatives prices held constant

question

giffen good

answer

demand curve slopes upward cause the (neg) income effect is larger than substitution

question

consumer surplus

answer

difference between what a consumer is willing to pay for a good and the amount they actually paid

question

bandwagon effect

answer

positive shift, trend

question

snob effect

answer

negative shift, consumer wants something that no one has, rarity

question

corner solution

answer

buys all of one good and none of the other, not equal to slope of the budget line

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