Term
|
Definition
| numerical score representing the satisfaction that a consumer gets from a given basket |
|
|
Term
|
Definition
| represents all combinations of market baskets that provide a consumer with the same level of satisfaction |
|
|
Term
|
Definition
| Additional satisfaction obtained from consuming one additional unit of a good |
|
|
Term
| Substitution and Marginal Utility |
|
Definition
marginal utility is the additional satisfaction obtained from consuming one additional unit of a good; MU decreases as more of a good is consumed.
Substitution - increase in price of good A will result in increased consumption of good B. |
|
|
Term
|
Definition
| constraints that consumers face as a result of limited incomes |
|
|
Term
|
Definition
| ratio of the typical bundle of consumer goods and services compared with the cost during a base period |
|
|
Term
| BLS (chain weighted index |
|
Definition
| Bureau of Labor Statistics cost-of-living index that accounts for changes in quantities of good and services |
|
|
Term
|
Definition
| aggregate sum of satisfaction or benefit gained from consuming a given amount of goods or services. The more consumed the greater the total utility. |
|
|
Term
| normal and inferior goods (4) |
|
Definition
inferior good - the quantity demanded falls as income increases. Causes income elacity is negative.
normal good - the income consumption curve is positive. the quantity demanded increase with income |
|
|
Term
|
Definition
| individual demand is curve relating the quantity of a good that a single consumer will buy to its price |
|
|
Term
|
Definition
| positive with normal goods (demand increases when income increases); negative with inferior goods (demand decreases when income increases). |
|
|
Term
| cross elasticity outcomes |
|
Definition
| with substitutes price increase in good A will increase consumption of good B. When complements, price increase in good A decreases consumption of good B. |
|
|
Term
| For every price change there are income and substitution affects |
|
Definition
Substituion Effect - always the same effect; decline in price results in increase in consumption of the good.
Income effect - can move demand in either direction depending on whether good is normal (income increases, consumption increases) or inferior (income increases, consumption decreases) |
|
|
Term
| (5) diversification to minimum risk |
|
Definition
| reducing risk by allocating resources to a variety of activities whose outcomes are not closely related |
|
|
Term
| CAPM (Capital Asset Pricing Model) |
|
Definition
| model in which the risk premium for a capital investment dependso n the correlation of the investment's return with the return on the entire stock market. |
|
|
Term
|
Definition
|
|
