Principles of Economics-Micro - 40085

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LCCStudent
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172904
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Principles of Economics-Micro - 40085
Updated:
2012-09-23 22:54:25
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Micro Economics
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Unit 4 - Chapter 8 Vocabulary
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  1. substitution effect
    When the price of a good drops, consumers will buy more of it because it becomes relatively cheaper compared to other goods.
  2. nominal income
    Income measured in terms of dollars.
  3. real income
    Income measured in terms of the goods and services that dollars can buy.
  4. income effect
    When the price of a good drops, consumers will buy more of it because the drop in price increases their real income.
  5. utility
    The pleasure or satisfaction a person gets from consumption or use of a good or service.
  6. marginal utility
    The change in utility caused by increasing the consumption of a good or service by one unit with everything else the same as before.
  7. Law of diminishing marginal utility
    As more of a good or service is consumed per time period, the additional pleasure or satisfaction received from consuming one more unit gets smaller, other things remaining the same.
  8. consumer equilibrium
    A situation that exists when an individual consumer is maximizing his or her utility - that is, they are spending all their budget and also getting the same marginal utility from the last dollar spent on each good.
  9. consumer surplus
    The difference between the price a consumer is willing to pay for a good or service and the price they actually pay.
  10. producer surplus
    The difference between the price a producer is willing to receive for a good or service and the price they actually receive.
  11. law of demand
    The law of demand says that the price of a good is inversely related to the quantity of a good demanded per time period, ceteris paribus. In other words, when the price of a good falls, the quantity of the good that consumers are able and willing to buy rises, other things remaining the same.

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