Micro chapter 5

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Terms in this set (...)

law of demand
the quantity demanded of a good or service declines as its price rises
what are some social driving forces that influences demand
peer influence, wanting the best of something's kind
what is utility
the satisfaction people derive from their consumption activities
law of diminishing marginal utility
The principle that as a consumer increases the consumption of a good or service, the marginal utility obtained from each additional unit of the good or service decreases
rational spending rule
spending should be allocated across goods so that the marginal utility per dollar is the same for each good
real price
the dollar price of a good relative to the average dollar price of all other goods
nominal price
the absolute price of a good in dollar terms
we want to focus on changes in the _____ price rather than the ______ price when faced with a decision on whether to spend a certain amount of money on something
real; nominal
three factors that influence demand
substitution effect
income effect
law of diminishing marginal utility
the quantity demanded at any price on the market demand curve is the ____ of the individual quantities demanded at that price
sum
when individual demand curves are identical, we get the market demand curve by _______ each quantity on the individual demand curvy the number of consumers in the market
multiplying
consumer surplus
the difference between a buyer's reservation price for a product and the price actually paid
the consumer surplus received by buyers is the shaded triangle between the _____ curve and the _____
demand; market price
Which of the following factors would influence a buyer's reservation price for a good or service?
social influence