Ch. 6

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Created by
Diantha Coutinho

Cards (10)

  • Index numbers are not directly measurable, but represent relative changes
  • Present use of index numbers
    • Measuring trends in a wide variety of areas such as stock market prices, cost of living, industrial and agricultural production, changes in exports and imports etc.
  • Index numbers are one of the most used statistical tools in Economics
  • Index numbers were originally developed to measure changes in the price level
  • Index number
    A device to measure changes in an economic variable (or group of variables) over a period of time
  • Economic variable
    A variable that is affected by economic conditions
  • Original use of index numbers
    • Measuring changes in the price level
  • Marginal utility is the amount of extra pleasure or satisfaction derived from consuming one more unit of a product.
  • The law of diminishing marginal utility states that additional units of a good will yield less satisfaction than previous units.
  • Substitution effect refers to the change in quantity demanded as a result of a price change, holding constant all other factors that affect demand.