Microeconomics Chapter 8

level of satisfaction that people reveive from their choices
-individuals are the only judge on their own utility

the additional utility provided by one additional unit of consumption

the pattern that each marginal unit of a good consumed provides less of an addition to utility than the previous unit

P1/P2 = MU1/MU2

normal or inferior

as income increases, quantity demanded increases

as income increases, quanitity demanded decreases

substituation and income effect

when a price changes, consumers buy less of the high prices good and more of the low priced good (always happens simultaneously with the income effect)

a change in price affects the buying power of income (always happens simultaneously with the substitution effect)
-higher price = reduces buying power, usually means buying less of both goods (normal goods)
-lower price = buying power increases, usually means buying more of both goods

the theoretical possibility that a higher price for a good could lead to a higher quantity demanded
(lower p=lower d)

the situation where high wage people can earn more by working less

-high income vs low income
-age

the common pattern that many people save/borrow little in early life, save more in the middle of life, and then spend their savings later in life