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Flashcards in 8: Utility & Demand Deck (6)
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1

What is a budget line? What fluctuates this line?

Line that shows the limits of her consumption possibilities, fluctuates by the consumer's budget and prices of goods/services.

2

What is utility? Total utility?

Utility: Benefit of satisfaction from consuming a good/service
Total utility: Total benefit a person gets from consumption of goods. Generally, more consumption = more total utility

3

What is marginal utility?

Increase in total utility that results from consuming one more unit of the good
More you consume = less marginal utility

4

What is consumer equilibrium?

Situation where the consumer allocates all of her income that maximizes total utility

5

What is marginal utility per dollar?

Marginal utility from a good that results from spending one more dollar on it.
Marginal utility/Price

6

When is total utility maximized?

All available income is spent
Marginal utility per dollar for all goods is equal
MU1/P1 = MU2/P2