Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
marginal utility diminishing marginal utility optimal consumption rule budget constraint marginal rate of substitution (MRS) substitution effect income effect | Rule holding that to maximize utility, a consumer should allocate spending so that the marginal utility per dollar is equal for all purchases. The change in consumption caused by the change in purchasing power from a price change. All the consumption bundles that a consumer can afford given their income and prices. The change in total utility from consuming an additional unit. The change in consumption caused by a change in relative prices holding the consumer’s utility level constant. Each additional unit of a good adds less to utility than the previous unit. The rate at which the consumer is willing to trade one good for another and remain indifferent. The MRS is equal to the slope of the indifference curve at that point. |