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curve tracing the utility-maximizing combinations of two goods as the price of one changes.
- e.g. as price of food falls, the consumption of both food and clothing increase because the decrease in price of food has increased the consumer's ability to purchase both goods. |
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| Curve relating the quantity of a good that a single consumer will buy to its price. |
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| Curve tracing the utility-maximizing combinations of two goods as a consumer's income changes. |
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| Curve relating the quantity of a good consumed to income. |
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| Change in consumption of a good associated with a change in its price, with the level of utility held constant |
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| change in consumption of a good resulting from an increase in purchasing power, with relative prices held constant |
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| Curve relating the quantity of a good that all consumers in a market will buy to its price. |
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| demand curve with a constant price elasticity |
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| difference between what a consumer is willing to pay for a good and the amount actually paid (the total benefit from the consumption of a product, less the total cost of purchasing it) |
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| When each individual's demand depends on the purchases of other individuals. |
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| positive network externality in which a consumer wishes to possess a good in part because others do. |
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| negative network externality in which a consumer wishes to own an exclusive or unique good. |
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| Two key properties of individual demand curve: |
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Definition
1. the level of utility that can be attained changes as we move along the curve
2. at every point on curve, the consumer is maximizing utility by satisfying the condition that the marginal rate of substitution of food for clothing equals the ratio of the prices of food and clothing. |
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