Goods that a consumer is interested in consuming but only in fixed proportions; has L shaped(right angled) indifference curves. Like left shoes and right shoes.
Two goods with straight line indifference curves. Like Nickels and dimes.
A curve that shows consumption bundles that give the consumer the same level of satisfaction (utility). Are ALWAYS downward sloping, NEVER cross other ___________ _________s, and higher __________ _________s are ALWAYS preferred when compared to lower __________ __________s. Also they are always bowed inwards.
Marginal Rate of substitution
The rate in which a consumer is willing to trade one good for another and stay on the same indifference curve. (MRS)
The limit on the consumption bundles that a consumer can afford., the set of all bundles a consumer can purchase for given values of income and price (first point is buying all one product and the end point is all of the other product)
A choice of a set of goods and services that maximizes the level of satisfaction for each consumer, subject to limited income. The point where the budget constraint is tangent to the indifference curve. Is also where the marginal rate of substitution(MRS) = relative price.
A good for which, other things equal, an increase in income leads to an increase in demand.
a good for which, other things equal, an increase in income leads to a decrease in demand
The change in consumption that results when a price change moves the consumer to a higher or lower indifference curve.
The change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution.
A good for which an increase in the price raises the quantity demanded, usually an inferior good accounting for a large share of a consumers budget that has a positively sloped demand curve because the income effect of a price change out weighs the substitution effect. Important because it VIOLATES Law of Demand. Potatoes in 19th century.
Cost of borrowing money, expressed as a percentage of the amount borrowed per year.