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Definition
| The Satisfaction, or pleasure that people receive from consuming a good or service.[image] |
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| The amount of satisfaction received from all the units of a good or service consumed. |
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Definition
| The change in total utility from one additional unit of a good or service |
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Law of dimishing marginal utility
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Definition
| The principle that the extra satisfaction of a good or service declines as people consume more in a given period. |
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Definition
| The condition in which total utility cannot increase by spending more of a given budget on one good and spending less on another good. |
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Definition
The change in quantity demanded of a good or service caused by a change in real income (purchasing power). This effect also occurs when items are on sale. The amount budgeted for a specific item, when that item is on sale, (in effect) increases, therefore allowing us to purchase more of that item. |
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Definition
The change in quantity demanded of a good or service caused by a change in its price relative to substitutes. If the cost of Dove soap increases, demand for Ivory soap will increase if they are substitutes. Price of competing good Y rises -> Consumers switch from good Y to good X -> Quantity of good X demanded increases. |
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Definition
| When the price of a normal good falls, the income effect and the substitution effect combine to cause the quantity demanded to increase. |
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Further info on Consumer Equilibrium
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Definition
The condition of reaching max level of satisfactio, given a budget when the MU(marginal utility) per dollar spent on each good purchased is equal. Consumer Equilibrium and the law of diminishing MU can be used to derive a downward-sloping demand curve. When price of a good falls, consumer equilibrium no longer holds, because the mu/$ for the good rises. |
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