Consumer : is an economic agent who
consumes final goods and services.
Total utility : It is the sum of satisfaction from consumption of all the unitsof a
commodity at a given time.
Marginal Utility : It is a net increase in total utility by consuming anadditional unit of
a commodity.
Law of Diminishing Marginal Utility : As consumer consumes more andmore units of
commodity. The Marginal utility derived from the last each successive units
goes on declining.
Consumer’s Bundle : It is a quantitative combination of two goods whichcan be purchased by a
consumer from his given income.
Budget set : It is quantitative
combination of those bundles which aconsumer can purchase his from given income
at prevailing market prices.
Consumer Budget : It states the real income or purchasing power of theconsumer from which
he can purchase the certain quantitative bundles of two goods at given price.
Budget Line : Shows those combinations of two goods which a consumercan buy from
limited income on same curve.
Monotonic Preferences : Consumer’s preferences are called monotonicwhen
between any two bundles, one bundle has more of one good and no less of other
good.
Change in Budget Line : There can be parallel shift (leftwards
orrightwards) due to change in income of the consumer and change in price of
goods.