AP®︎ Microeconomics: Topic 1.6 Flashcards

Comparing the additional benefit and additional cost of one more unit of an activity.

Past or unchangeable costs that should not affect the current optimal choice.

The satisfaction or happiness a consumer receives from consuming goods and services.

The total satisfaction gained from consuming a given quantity of a good or goods.

Limits on choices caused by scarce income, prices, and available purchasing power.

As more units are consumed, the extra satisfaction from each additional unit usually falls.

Marginal utility divided by price, showing satisfaction gained from each dollar spent.

Spend income so the last dollar on each good gives equal marginal utility per dollar.

Buy more of the good with higher utility per dollar and less of the other.

The best choice occurs where the additional benefit of one more unit equals its additional cost.

The extra satisfaction from one more unit consumed, which can eventually become negative.

Consumers maximize total utility subject to budget constraints by comparing marginal utility per dollar.

A buyer assumed to make choices that maximize total utility within a budget.