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Assignment in Economics

Define the ff:


a. Utility
- Utility is the economist's way of measuring pleasure or happiness and how it
relates to the decisions that people make. Utility measures the benefits (or
drawbacks) from consuming a good or service or from working. Although
utility is not directly measurable, it can be inferred from the decisions that
people make. Utility in economics is usually described by a function, such
as the expotential utility function.
b. Law of diminishing marginal utility
- A law of economics stating that as a person increases consumption of a
product - while keeping consumption of other products constant - there is a
decline in the marginal utility that person derives from consuming each
additional unit of that product.
- a principle in social science: as one acquires successive units of a good, the
intensity of desire for additional units declines
c. Budget line
- A consumer's budget line characterizes on a graph the maximum amounts of
goods that the consumer can afford. In a two good case, we can think of
quantities of good X on the horizontal axis and quantities of good Y on the
vertical axis. The term is often used when there are many goods, and without
reference to any actual graph.
d. Indifference curve
- In microeconomic theory, an indifference curve is a graph showing different
bundles of goods between which a consumer is indifferent. That is, at each
point on the curve, the consumer has no preference for one bundle over
another. One can equivalently refer to each point on the indifference curve as
rendering the same level of utility (satisfaction) for the consumer. Utility is
then a device to representpreferences rather than something from which
preferences come.[1] The main use of indifference curves is in
the representation of potentially observable demandpatterns for individual
consumers over commodity bundles.
- A diagram depicting equal levels of utility (satisfaction) for a consumer faced
with various combinations of goods.

e. Law of diminishing returns

The tendency for a continuing application of effort or skill toward a particular


project or goal to decline in effectiveness after a certain level of result has
been achieved.
A law of economics stating that, as the number of new employees increases,
the marginal product of an additional employee will at some point be less than
the marginal product of the previous employee.
a law affirming that to continue after a certain level of performance has been r
eached will resultin a decline in effectiveness

f. Lorenz curve
- A graphical representation of wealth distribution developed by American
economist Max Lorenz in 1905. On the graph, a straight diagonal line
represents perfect equality of wealth distribution; the Lorenz curve lies
beneath it, showing the reality of wealth distribution. The difference between
the straight line and the curved line is the amount of inequality of wealth
distribution, a figure described by the Gini coefficient.
- a curve formed by plotting the cumulative distribution of the amount of a
variable against the cumulative frequency distribution of the individuals having
the amount (as for indicating the degree of concentration of salary income
among a number of individuals)
-

The Lorenz curve is used in economics and ecology to describe inequality in


wealth or size. The Lorenz curve is a function of the cumulative proportion of
ordered individuals mapped onto the corresponding cumulative proportion of
their size. Given a sample of ordered individuals with the size of
individual and
, then the sample Lorenz curve is the polygon
joining the points
, where
, 1, 2, ... ,
, and
.
Alternatively, the Lorenz curve can be expressed as

where
is the cumulative distribution function of ordered individuals
and is the average size.If all individuals are the same size, the Lorenz
curve is a straight diagonal line, called the line of equality. If there is any
inequality in size, then the Lorenz curve falls below the line of equality.
The total amount of inequality can be summarized by the Gini
coefficient (also called the Gini ratio), which is the ratio between the area
enclosed by the line of equality and the Lorenz curve, and the total
triangular area under the line of equality. The degree of asymmetry around
the axis of symmetry is measured by the so-called Lorenz asymmetry
coefficient.

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