The Non-Satiation Principle states that individuals are never fully satisfied with their consumption and will always seek to increase their utility or satisfaction by acquiring more goods or services.
In economics, marginal generally means 'additional' or 'incremental'.
The Assumption of Completeness states that consumers can compare and rank all possible bundles of goods, meaning they can determine their preferences between any two options.
The NON-SATIATION principle states that for any bundle of goods, there exists another bundle that is strictly preferred to it, meaning consumers always prefer more of a good to less.
This phrase reflects the idea that individuals often face limitations in their choices and may not achieve their desired outcomes due to constraints such as resources, preferences, or external factors.
The shape of indifference curves is determined by the Marginal Rate of Substitution (MRS), which represents the trade-offs a consumer is willing to make between two goods.
The Marginal Rate of Substitution (MRS) represents the trade-offs a consumer is willing to make between two goods.
The marginal rate of substitution is the rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility.
The slope of the indifference curve represents the marginal rate of substitution, indicating how much of one good a consumer is willing to give up for an additional unit of another good while remaining equally satisfied.
Indifference Curves are a fundamental component of Consumer Choice Theory, illustrating how consumers make choices based on their preferences and the trade-offs between different goods.
It can be illustrated by drawing tangents at different points on an indifference curve.
The Assumption of Transitivity states that if a consumer prefers A to B and B to C, then they must also prefer A to C, ensuring consistent preferences.
A graphical representation of different bundles of goods between which a consumer is indifferent. Each point on the curve represents a combination of goods that provides the consumer with the same level of satisfaction.
Transitivity is the principle that if bundle x is preferred to bundle y, and bundle y is preferred to bundle z, then bundle x is preferred to bundle z.
A fundamental assumption in Consumer Choice Theory that suggests consumers always prefer more of a good to less, indicating that their satisfaction or utility increases with increased consumption.
The foundational principles that guide consumer preferences and choices, typically including completeness, transitivity, and non-satiation.
The rate at which a consumer is willing to give up one good in exchange for another good while maintaining the same level of utility.
Consumer Choice Theory is an economic theory that describes how consumers make decisions to allocate their resources among various goods and services to maximize their utility.
The Transitivity Assumption states that if a consumer prefers option A over option B and option B over option C, then the consumer must also prefer option A over option C.
Indifference Curves are graphical representations that show different combinations of two goods that provide the same level of utility or satisfaction to a consumer.
Consumers can compare and rank all possible bundles.
The MRS is a concept in economics that refers to the rate at which a consumer is willing to trade one good for another while maintaining the same level of utility or satisfaction.
A graphical representation that shows different combinations of two goods that provide the same level of utility to a consumer.
It means that as the consumer’s stock of X increases and his stock of Y decreases, he is willing to forego less and less of Y for a given increment in X.
The Non-Satiation Principle suggests that more of a good is always preferred to less, meaning consumers will always seek to increase their consumption of goods and services.
The Graphical Representation of Preferences involves using graphs, such as indifference curves and budget constraints, to illustrate consumer choices and preferences visually.
The Non-Satiation Principle is the assumption that consumers have a positive marginal utility, meaning that each additional unit of a good consumed provides some additional satisfaction, even if that satisfaction diminishes with each subsequent unit.
The shape of Indifference Curves typically slopes downward and is convex to the origin, indicating that as a consumer substitutes one good for another, the rate of substitution decreases.
The distance between Indifference Curves represents different levels of utility; curves that are farther from the origin indicate higher levels of satisfaction.
If a consumer prefers bundle A over B, and B over C, then they must prefer A over C.
The marginal rate of substitution of X for Y falls as the consumer has more of X and less of Y.
The Assumption of Completeness implies that consumers can compare and rank all possible combinations of goods and services, indicating a preference for one over the other or indifference between them.
Completeness is the assumption that when confronted with any two bundles, the consumer can determine which one she prefers or whether she is indifferent between them.
If two Indifference Curves intersect, it violates the assumption of transitivity, suggesting that the consumer's preferences are inconsistent.
More is always better; consumers prefer more of at least one good.
Indifference Curves are graphical representations that show combinations of two goods that provide the same level of utility to a consumer, indicating their preferences.
The Marginal Rate of Substitution (MRS) is the rate at which a consumer is willing to give up one good in exchange for another while maintaining the same level of utility.
Diminishing Marginal Rate of Substitution refers to the principle that as a consumer substitutes one good for another, the amount of the good being given up decreases, reflecting a decrease in the willingness to substitute.
Utility and Satisfaction refer to the level of pleasure or satisfaction a consumer derives from consuming goods and services, which drives their purchasing decisions.
Trade-offs in Consumer Choices refer to the decisions consumers make when they must give up one good or service to obtain another, reflecting the opportunity cost of their choices.
