ECON PRELIM 2

ECON PRELIM 2 - ECON PRELI M 2 Consumer Theory B udget...

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ECON PRELIM 2 Consumer Theory Budget constraint- the limits imposed on household choices by income, wealth and product prices. Choice set or opportunity set- the set of options that is defined and limited by a budget constraint As an equation: Total expenditure must equal price times quantity Slope of Budget Constraint- Px/Py – the ratio of price X to the price of Y. Utility- the satisfaction a product yields – whether one thing is preferable to another depends on how much utility it yields. -impossible to measure -helps us better understand the process of choice Marginal Utility- additional satisfaction gained by the consumption or use of ONE MORE unit of a good or service (MU) -one reason people prefer variety is consuming more and more reduces extra satisfaction they get from further consumption of the same good. Total utility- the total amount of satisfaction obtained from the consumption of a good or service. Normal Good- income elasticity of demand positive
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This note was uploaded on 10/19/2009 for the course ECON 1101 taught by Professor Evans during the Spring '08 term at Cornell.

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ECON PRELIM 2 - ECON PRELI M 2 Consumer Theory B udget...

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