Marginal utility per dollar represents how much additional satisfaction can be obtained from spending one more dollar on a particular good or service.
Think about going to a buffet. The marginal utility per dollar is the satisfaction you get from each additional dollar spent on food. If you find a dish that gives you a lot of satisfaction for its price, it has high marginal utility per dollar.
Consumer Equilibrium: Consumer equilibrium occurs when the marginal utility per dollar spent on each good or service is equal.
Income Effect: The income effect refers to the change in quantity demanded of a good due to a change in purchasing power resulting from a change in income.
Substitution Effect: The substitution effect describes how consumers may switch to alternative goods or services based on changes in relative prices.
Study guides for the entire semester
200k practice questions
Glossary of 50k key terms - memorize important vocab
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.