ECON 1050 Study Guide - Midterm Guide: Sole Proprietorship, Variable Cost, Normal-Form Game

117 views19 pages

Document Summary

Budget line - graphically represents the consumptions limits of a household, and the choices that they have to make. Real income - income expressed as a quantity of goods that a household can afford to buy. (income/price) Relative price - the price of one good divided by the price of another good. A change in price changes one of the axis values in a budget equation. A change in income pushes the line inwards or outwards. Indifference curve - a line showing all the possible quantity combinations of goods that are possible within/on the budget line. Marginal rate of substitution - the rate at which someone will trade a good in order to obtain another unit of another good. Degree of substitutability - look at graphs in book. (pg 207) The best affordable choice - occurs when the marginal rate of substitution between two goods is equal to the relative price (the slope of the budget line)

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers

Related Documents

Related Questions