A price effect describes how a change in the cost of a good changes the amount consumers buy.
Tag: consumer theory
causes of a shift in the budget line
A budget line shift occurs when there is a change in a consumer’s purchasing power, affecting the combinations
equi-marginal principle
The equi-marginal principle explains how a rational consumer with a limited budget chooses to spend their money. To
limitations of marginal utility theory
Limitations of marginal utility theory refer to the weaknesses and unrealistic assumptions within the utility maximisation model, which
indifference curve
An indifference curve is a graph showing different combinations of two goods that provide a consumer with the
limitations of the model of indifference curves
The indifference curve model is a tool used in economics to understand consumer choices. However, it has several
Giffen goods
A Giffen good is a rare type of inferior good where the amount people want to buy increases
substitution effect
The substitution effect explains how people change their buying habits when the price of a product changes, while
income effect
The income effect explains how a change in the price of a product affects a consumer’s purchasing power
budget line
A budget line, also known as a budget constraint, shows all possible combinations of two goods that a