What is an indifference curve?
An indifference curve represents all combinations of goods that give the consumer the same level of utility.
What are the two Key properties of Indifference curves ?
Consumers prefer higher indifference curves
Indifference curves are always downward sloping
What do economists call the additional increment to utility obtained from consuming one more unit of a good?
Marginal utility
What economic concept describes the idea that each additional unit of a good provides less additional utility than the previous one?
Diminishing marginal utility
How we call the rate at which a consumer is willing to trade one good for another ?
Marginal rate of substitution (MRS)
How we call the cost of any purchase where the next best alternative use of that money or forgone opportunity?
opportunity cost
Which two effects happens when we change the price ?
Substitution effect
Income effect
What are the two categories of goods distinguished by whether demand rises or falls when income increases?
Normal goods and inferior goods
How do we call a curve showing the quantity of a good demanded by individuals at each price ?
Demand curve
How do we call a curve which shows the quantity of a good where firms are willing to produce (supply) at each price ?
Supply curve
Last changed6 days ago