Some Key Terms For Ch 2 of the SG

Hey ladies & gentlemen, these are some terms where I just couldn't understand thus hampering my meaning (and that includes watching videos, link HERE)

So I will list the words that I didn't grasp fully or was confused about in certain contexts (e.g. I knew what these words meant in some context but not in others)

Source: HERE

1. Utility: measure of relative satisfaction from or desirability of consumption of various good & services. In plain English = A scale of (probably on a graph) of how much satisfaction we get from a goods & services (product)

2. Neoclassical economics: Old school economic concepts.

3. Rationality: An old school econ, oops, neoclassical economics concept. It is precisely defined in terms of imputed utility-maximizing behavior under economic constraints.

Plain English: people getting the maximum satisfaction out of their limited resources (remember the PPF!!! Always go back to the PPF), in other words they are on a point at the PPF, not under. If they are under the graphed line, then it is irrational behaviour.

4. Indifference Curve: plots the combination of commodities that an individual or a society requires to maintain a given level of satisfaction.

Plain English: Please leave a comment, on how to put this in plain English, LOL, cuz I don't know!

5. Ordinal utility: states that while the utility of a particular good and service cannot be measured using an objective scale, a consumer is capable of ranking different alternatives available.

Plain English: Basically it's how a customer rates how much one product over the other (remember the ~ indifferent to, and > prefers) using the scale system (like 1 to 5 or 1 to 10 or 4 stars, etc)

6. Cardinal utility: The magnitude of utility differences is treated as an ethically or behaviorally significant quantity. (Remember the SG, pg 69, Example 2)

Plain English: How much more does someone like A over B over C, etc.

7. Transitive: Noting a relation in which one element in relation to a second element and the second in relation to a third element implies the first element is in relation to the third element, as the relation “less than or equal to.”

Plain English: (Personally this word drove me the craziest as to what it meant). If there's product A & B, and if you prefer one over the other, then it's transitive, so you need 2 or more items for basis of comparison.

8. Complete: Of or pertaining to a set in which every fundamental sequence converges to an element of the set.

Plain English: (This also drove me crazy), it basically means when the comparisons are done, e.g. A > B > C, it is transitive because you're comparing and it's complete because you finished/concluded the comparison :)

I hope this was helpful, if you have any questions or see any mistakes please feel free to leave a comment and I'll correct them or if you have a simpler explanation, please leave a comment.