Wrapping Up Vocab for this
Diminishing Marginal Utility: The more
you buy of something, the less
satisfaction you get from it.
Buy a car, get great satisfaction
(you do not buy many cars in your life)
Buy a pencil, whoopie, big deal
1st Doughnut = YUMMM!!
2nd Doughnut = Yumm
3rd Doughnut = umm, yumm?
4th Doughnut = I’m full
5th Doughnut = ugg, no more
Normal Good: A good for which demand INCREASES as
Inferior Good: A good for
DECREASES as income
Compliments: Goods that are consumed together.
Peanut butter and Jelly
Hammers and nails
Substitutes: Goods that are consumed as replacements
for other goods.
Price of coffee goes up, I substitute tea, or apple juice
Price Ceiling: Artificial price beyond
which a good may not increase
Rent controls: NYC had a law
prohibiting rent over a certain price
Price Floors: Artificial low price
(usually set by the government)
beyond which a good may not
Milk: Govt sets minimum
price to keep dairy farmers
from losing money.
Quotas: Setting limits or goals on production/ importation
Designed to allow increased competition by limiting
Protect ecosystems by limiting fishing or hunting
Encourage production by setting high goals (USSR