Consumer Choice
All 9 Consumer Choice terms in the AP Economics glossary — each with a clear, exam-accurate definition. Tap any term for the full explanation, formula, and related interactive graph.
A budget constraint shows all combinations of goods a consumer can afford given their income and the prices of the goods.
The income effect is the change in quantity demanded caused by a price change altering a consumer's real purchasing power.
The law of diminishing marginal utility states that each additional unit of a good consumed adds less extra satisfaction than the unit before it.
Marginal utility is the additional satisfaction gained from consuming one more unit of a good.
The substitution effect is the change in quantity demanded when a price change makes a good relatively cheaper or pricier than its alternatives.
Total utility is the overall satisfaction a consumer receives from consuming a given quantity of a good.
Utility is the satisfaction or benefit a consumer gets from consuming a good or service.
The utility-maximization rule says consumers maximize satisfaction by equalizing the marginal utility per dollar spent across all goods.
An Engel curve shows how the quantity of a good a consumer buys changes as income changes, holding prices constant: upward-sloping for normal goods, downward for inferior goods.