disc4 - Econ 101 Prof. Korinna Hansen Introductory...

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Econ 101 Prof. Korinna Hansen Introductory Microeconomics Handout 4 Budget constraint : The limits imposed on household choices by income wealth and product prices. Opportunity set : The set of options that is defined and limited by a budget constraint. Utility : The satisfaction a product yields. Marginal utility : The additional satisfaction gained by the consumption or use of one more unit of a good or service. Total utility : The total amount of satisfaction obtained from consumption of a good or service. Indifference curve : All the points on the curve have the same total utility level. The propensities of indifference curve: Negative slope, convex, No intersection between two different utility curves. Utility-maximizing rule : Equating the ratio of the marginal utility of a good to its price for all good. The marginal utility per dollar should be the same for all goods. 1. True or false? explain: a. If a consumer moves upward along an indifference curve, his or her total utility increases. b. A consumer spends $40 on movies and hamburgers. If the price of movies deceases, the consumer’s total utility will be less. c. A consumer spends $40 on movies and hamburgers. If a consumer’s income changes from
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This note was uploaded on 11/27/2011 for the course ECONOMICS 101 taught by Professor Kelly during the Fall '10 term at University of Wisconsin.

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disc4 - Econ 101 Prof. Korinna Hansen Introductory...

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