chap 9-17 terms - Definitions Chapter 9 Utility Marginal...

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Chapter 9 Utility The enjoyment of satisfaction people receive from consuming goods and services. Marginal Utility (UT) The change in total utility a person receives from consuming one additional unit of a good or service. Law of Diminishing Marginal Utility The principle that consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time. Budget Constraint The limited amount of income available to consumers to spend on goods and services. Income Effect The change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding all other factors constant Substitution Effect The change in quantity demanded of a good that results from a change in price making the good more or less expensive relative to other good, holding constant the effect of the price change on consumer purchasing power. Network Externality This situation where the usefulness of a product increases with the number of consumers who use it. Behavioral Economics The study of situations in which people make choices that do not appear to be economically rational. Opportunity Cost The highest values alternative must be given up in order to engage in an activity. Endowment Effect The tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn’t already own it. Sunk Cost A cost that has already been paid and cannot be recovered Indifference Curve A curve that shows the combination of consumption bundles that give the consumer the same utility. Marginal Rate of Substitution The slope of an indifference curve, which represents the rate at which a consumer would be willing to trade off one good for another. Chapter 10 Technology The processes a firm uses to turn inputs into outputs of goods and services. Technological Change A change in the ability of a firm to produce a given level of output with a given quantity of inputs. Short Run The period of time during which at least one of a firm’s inputs is fixed. Long Run The period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plant. Total Cost
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This note was uploaded on 02/15/2010 for the course ECO 001 taught by Professor Gunter during the Fall '06 term at Lehigh University .

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chap 9-17 terms - Definitions Chapter 9 Utility Marginal...

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