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| What is the Algebraic Formula for Price Elasticity of Demand? |
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What is the slope of this demand function?
QD=A-BP |
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What do Indifference Curves Represent?
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A diagram depicting equal levels of utility (satisfaction) for a consumer faced with various combinations of goods.
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What is Marginal Rate of Substitution?
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The amount of one good that an individual consumer is willing to give up to obtain one more unit of another good.
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The Marginal Rate of Substitution of "Good X" for "Good Y" does what what as the consumption of "Good X" increases?
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What is the shape of an indifference curve?
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Convex, it slopes down from left to right
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What kind of marginal utility do consumers exhibit?
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Diminishing Marginal Utility
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What is an indifference set?
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A table that represents combinations of Good X and Good Y to illustrate the Marginal Rate of Substitution for Good X and Good Y.
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If for every "A" of "Good X" one would sacrifice "B" of "Good Y", what would the indifference curve look like?
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A line, it would be linear.
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What kind of slope do all indifference curves have?
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What does the negative slope of the indifference curve insure?
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That consumers prefer more to less aka consumer preferences are monotone.
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If preferences are monotone what does that mean?
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If a consumer enjoys a good, no matter how much of the good is given, then utility will always increase.
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What is an indifference Map?
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Multiple indifference curves on a diagram in which each combination could lie on it's own distinct indifference curve.
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Utility can be what type of number?
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Any non-negative real number
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Suggestion that if Combination A is preferred to Combination B, and Combination B is preferred to Combination C, then Combination A is preferred over Combination C.
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What reflects the transitivity of consumer preferences?
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Do Indifference Curves Cross?
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If two combinations lie on the same indifference curve then what?
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Then the combinations must be indifferent of one another
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If a combination is higher than another combination on an indifference curve, the what?
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It is preferred over the lower combination.
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What do consumers try to maximize?
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Their utility aka satisfaction
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Consumers prefer more utility, which means consumers prefer what?
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Higher indifference curves
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The higher an indifference curve, the more what does the combination on the curve possess?
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What is a Budget Constraint aka Budget Line?
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A line that illustrates every possible combination of two goods that an individual consumer is able to purchase given a particular money income and prices for the two goods.
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What is the Consumption Possibility Frontier?
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A graph of the maximum quantities of goods (usually two) that an economy can consume in a specified situation. Used to illustrate the potential benefits from trade by showing that it can expand consumption possibilities.
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What is the consumer's problem?
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Consumer wants to maximize utility while subject to a budget restraint.
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What is the Utility Maximization Point?
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Where an indifference curve sits right on the budget line. Where the consumer gets the maximum utility within a budget.
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What is a well-defined set?
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A set where you know what is in it, and what is not.
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Indifference sets and budget constraint lines are what kind of sets?
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