Term
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Definition
| a person's level of satisfaction or happiness |
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Term
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Definition
| the additional utility provided by onea ddition unit of consumption |
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Term
| diminishing marginal utility |
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Definition
| the common pattern that each marginal unit of a good consumed provides less of an addition to utility than the previous unit |
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Term
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Definition
| when a price changes, consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price; always happens simultaneously with an income effect |
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Term
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Definition
| a higher price means that, in effect, the buying power of income has been reduced, even though actual income has not change; always happens simultaneously with a subsititution effect |
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Term
| backward bending supply curve for labor |
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Definition
| the situation when high-wage people can earn so much that they respond to a still-higher wage by working fewer hours |
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Term
| life-cycle theory of savings |
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Definition
| the common pattern that many people save little or borrow heavily early in life, save mor ein the middle of lfe, and then draw upon their accumulated savings later in life |
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Term
| properties of indifference curves |
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Definition
1)more is better
2)indifference curves never cross
3) indifference curves are downward sloping and convex (because of diminishing marginial utility) |
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Term
| marginal rate of substitution |
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Definition
| the rate at which consumers will tradeoff goods |
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