Microeconomics - Ordinal Utility

Microeconomics – Ordinal Utility

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Posted on

May 22nd, 2023

question

Indifference curve

answer

Shows combinations of two goods among which the consumer is indifferent. Reflect consumer preferences.

question

Rightward

answer

What direction on the indifference curve are you moving to a more preferred combination of goods?

question

Budget line

answer

Shows maximum affordable combinations of goods that a person can buy, given his or her budget constraint

question

answer

How many budget lines does a consumer have

question

Income & price of goods

answer

What two factors impact a consumer's budget line

question

Vertical intercept

answer

A change in the price of Good A results in the budget line changing in what way?

question

Marginal rate of substitution (MRS)

answer

The rate at which a consumer is willing to give up consumption of one good (y-axis) for additional consumption of another (x-axis), while still maintaining the same level of utility

question

Marginal rate of substitution (MRS)

answer

What is equal to the slope of the indifference curve?

question

Marginal rate of substitution (MRS)

answer

Why are indifference curves convex to the origin?

question

P(x) X + P(y) Y

answer

Formula for income, assuming income restraint

question

Y = -P(x)/P(y) * X + Income/P(y)

answer

Budget line formula

question

Consumer equilibrium

answer

Point where consumers consume at the highest indifference curve that their budgets will allow

question

Horizontal

answer

pEOPLE WITH STEEP INDIFFERENT CURVES VALUE THE GOOD ALONG WHICH AXIS?

question

Vertical

answer

People with flat indifference curves value the good along which axis?

question

Proprietorship

answer

Firm with one owner, easy to set up, profits are taxed once, owner has unlimited liability for debts, difficult to raise large amounts of capital, business ends when owner dies

question

Partnership

answer

Firm with two or more owners, less expensive to raise funds, profits taxed only once, partners have unlimited liability for debts, business might continue if an owner dies

question

Corporation

answer

Firm owned by shareholders, financial capital is relatively easy to obtain, shareholders enjoy limited liability, relatively difficult/costly to set up, slow decision making, profits are taxed twice

1 of 17

question

Indifference curve

answer

Shows combinations of two goods among which the consumer is indifferent. Reflect consumer preferences.

question

Rightward

answer

What direction on the indifference curve are you moving to a more preferred combination of goods?

question

Budget line

answer

Shows maximum affordable combinations of goods that a person can buy, given his or her budget constraint

question

answer

How many budget lines does a consumer have

question

Income & price of goods

answer

What two factors impact a consumer's budget line

question

Vertical intercept

answer

A change in the price of Good A results in the budget line changing in what way?

question

Marginal rate of substitution (MRS)

answer

The rate at which a consumer is willing to give up consumption of one good (y-axis) for additional consumption of another (x-axis), while still maintaining the same level of utility

question

Marginal rate of substitution (MRS)

answer

What is equal to the slope of the indifference curve?

question

Marginal rate of substitution (MRS)

answer

Why are indifference curves convex to the origin?

question

P(x) X + P(y) Y

answer

Formula for income, assuming income restraint

question

Y = -P(x)/P(y) * X + Income/P(y)

answer

Budget line formula

question

Consumer equilibrium

answer

Point where consumers consume at the highest indifference curve that their budgets will allow

question

Horizontal

answer

pEOPLE WITH STEEP INDIFFERENT CURVES VALUE THE GOOD ALONG WHICH AXIS?

question

Vertical

answer

People with flat indifference curves value the good along which axis?

question

Proprietorship

answer

Firm with one owner, easy to set up, profits are taxed once, owner has unlimited liability for debts, difficult to raise large amounts of capital, business ends when owner dies

question

Partnership

answer

Firm with two or more owners, less expensive to raise funds, profits taxed only once, partners have unlimited liability for debts, business might continue if an owner dies

question

Corporation

answer

Firm owned by shareholders, financial capital is relatively easy to obtain, shareholders enjoy limited liability, relatively difficult/costly to set up, slow decision making, profits are taxed twice

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