ECON 302 EXAM 1 Questions & Answers Graded A+

Budget Constraint - Answer represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income Marginal Rate of Transformation - Answer the rate at which a consumer is able to trade one good for another, the amount of good Y a consumer must give up to obtain an extra unit of good X, the slope of the budget constraint Utility Function - Answer a mathematical way to represent a consumer's preferences Marginal Utility - Answer how much extra utility a consumer gets when they consume an extra unit of a good Law of Diminishing Marginal Utility - Answer as a consumer consumes more and more of a good, at some point the marginal utility of that good begins to decrease