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6.4: Key Terms

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    181336

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    Example and Directions
    Words (or words that have the same definition) The definition is case sensitive (Optional) Image to display with the definition [Not displayed in Glossary, only in pop-up on pages] (Optional) Caption for Image (Optional) External or Internal Link (Optional) Source for Definition
    (Eg. "Genetic, Hereditary, DNA ...") (Eg. "Relating to genes or heredity") The infamous double helix https://bio.libretexts.org/ CC-BY-SA; Delmar Larsen
    Glossary Entries
    Word(s) Definition Image Caption Link Source
    behavioral economics a branch of economics that seeks to enrich the understanding of decision-making by integrating the insights of psychology and by investigating how given dollar amounts can mean different things to individuals depending on the situation        
    budget constraint, or budget line shows the possible combinations of two goods that are affordable given a consumer’s limited income        
    consumer equilibrium point on the budget line where the consumer gets the most satisfaction; this occurs when the ratio of the prices of goods is equal to the ratio of the marginal utilities.        
    diminishing marginal utility the common pattern that each marginal unit of a good consumed provides less of an addition to utility than the previous unit        
    fungible the idea that units of a good, such as dollars, ounces of gold, or barrels of oil are capable of mutual substitution with each other and carry equal value to the individual        
    income effect a higher price means that, in effect, the buying power of income has been reduced, even though actual income has not changed; always happens simultaneously with a substitution effect        
    marginal utility the additional utility provided by one additional unit of consumption        
    marginal utility per dollar the additional satisfaction gained from purchasing a good given the price of the product; MU/Price        
    substitution effect when a price changes, consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price; always happens simultaneously with an income effect        
    total utility satisfaction derived from consumer choices        

    This page titled 6.4: Key Terms was last modified on Sun, 21 Sep 2025 19:56:33 GMT and is shared under a CC BY 4.0 license and was authored, remixed, and/or curated by OpenStax via source content that was edited to the style and standards of the LibreTexts platform.