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Ch. 3&4 Vocab - CHAPTER 3 Budget constraint-defined by...

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CHAPTER 3 Budget constraint-defined by the income available for consumption and the prices that a consumer faces Consumption bundles-quanitities of various goods or services that a consumer might consume Disposable income-personal income after the payment of tax obligations Engel’s Law-as disposable income of a consumer increases, the percentage of income spent for food decreases if all other factors remain constant Indifference curve-a graph of the locus of consumption bundles that provide a consumer a given level of satisfaction Law of diminishing marginal utility-marginal utility declines as more of a good/service is consumed during a specified period of time Marginal rate of substitution-the rate of exchange of pairs of consumption goods or services to leave utility or satisfaction unchanged Marginal utility-the change of utility or satisfaction as consumption of a good increases by one unit
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