326 Review

326 Review - 326 Review - Positive analysis- descriptive...

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326 Review - Positive analysis- descriptive statements of cause and effect - Normative analysis- statements that embody value judgments - Law of demand- Price and quantity are normally inversely related - Ceteris Paribus- Other things being the same CH. 2 - Nonsatiation assumption- More is better - Indifference curve- the set of all bundles among which a consumer is indifferent - Marginal rate of substitution (MRS)- the negative of the slope of an indifference curve; it measures the rate at which the consumer is willing to trade one good for the other. - Diminishing MRS- when the MRS falls as we move down along the indifference curve - Indifference map- entire collection of indifference curves * indifference curves cannot cross - Perfect substitutes- goods that can be substituted for each other at a constant rate, that is, that have a constant marginal rate of substitution - Perfect complements- goods that have to be consumed in fixed proportions - Total utility- the total satisfaction, sometimes given by a numerical score, of consuming a particular commodity bundle - Ordinal utility function- a utility function allowing the ranking of bundles by their
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326 Review - 326 Review - Positive analysis- descriptive...

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