ECON 2400 Lecture Notes - Lecture 1: Macroeconomic Model, Normal Good, Utility
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budget line
marginal utility
complete property of preferences
market demand
consumption bundle
substitution effect
Giffen good
total effect
income effect
transitive property of preferences
indifference curves
utility
the marginal rate of substitution
utility function
1. |
_____ |
The satisfaction or benefit that consumers receive from consuming goods or services.
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2. |
________________ _ |
A particular combination of specific quantities of goods or services |
3. |
________________ _ |
Consumers can rank all conceivable bundles of goods or services |
4. |
_____ |
If A is preferred to B, and B is preferred to C, then A is always preferred to C. |
5. |
_____ |
Equation showing a consumerâs perception of the total utility forthcoming from consuming each bundle of goods and services. |
6. |
_____ |
A set of consumption bundles each and every one of which provides a consumer with exactly the same level of total utility. |
7. |
_____ |
The number of units of Y that must be given up for total utility to remain the same when one more unit of X is consumed. |
8. |
_____ |
The addition to total utility attributable to consuming one more unit of a good, holding the consumption of all other goods constant. |
9. |
_____ |
The line showing all bundles of goods that can be purchased at given prices if the entire income is spent. |
10. |
_____ |
The change in the consumption of a good that would result if the consumer remained on the original indifference curve after the price of the good changes. |
11. |
_____ |
The change in consumption of goods results strictly from the change in purchasing power after the price of a good changes. |
12. |
________________ _ |
The sum of the substitution and income effects. |
13. |
_____ |
A good for which quantity demanded varies directly with price, causing an upward sloping demand curve. |
14. |
_____ |
A list of prices and the corresponding quantity consumers are willing and able to purchase at each price. |
The US Bureau of Labor Statistics calculates inflation by taking samples of prices for a 'basket of goods and services' a 'typical consumer' would purchase. Each good and service is assigned a 'weight' or the percentage of income spent on that product. For example, 'cakes, cupcakes, and cookies' are given a weight of 0.197. This means that about 0.2% of the 'average' household spending is made on these items. Of course, an individual's spending may vary significantly from the hypothetical basket of goods and services. In this assignment, you will review the BLS's Relative importance of components in the Consumer Price Indexes and compare how your household spending measures up to the typical consumers.
Part I
Considering your household budget, divide up your spending into these eight broad categories:
Category | CPI Weight | Your Budget |
---|---|---|
Food and beverages | 14.8 | |
Housing | 41.5 | |
Apparel | 3.6 | |
Transportation | 17.3 | |
Medical Care | 6.6 | |
Recreation | 6.3 | |
Education & Communication | 6.4 | |
Other | 3.5 | |
Total | 100 | 100 |
How closely does your household spending correlate to the typical consumer? How might your household be disproportionately affected by a change in one of these broad categories? Do you believe that the government's weightings are an accurate approximation for the whole economy?