Robert H. Frank,
Cornell University
Ian C. Parker,
University of Toronto
| Affordable set | Bundles on or below the budget constraint; bundles for which the required expenditure at given prices is less than or equal to the income available.
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| Best affordable bundle | The most preferred bundle of those that are affordable.
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| Budget constraint | The set of all bundles that can be purchased with given income and prices, if all income is spent.
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| Bundle | A particular combination of two or more goods.
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| Composite good | A hypothetical construct representing all other goods on which income could be spent, with their prices relative to each other held constant.
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| Corner solution | In a choice between two goods, a case in which the consumer does not consume one of the goods.
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| Indifference curve | A set of bundles among which the consumer is indifferent.
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| Indifference map | A representative sample of the set of a consumer's indifference curves, used as a graphical summary of her preference ordering.
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| Marginal rate of substitution (MRS) | At any point on an indifference curve, the rate at which the consumer is willing to exchange the good measured along the vertical axis for the good measured along the horizontal axis; equal to the absolute value of the slope of the indifference curve.
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| Preference ordering | A scheme whereby the consumer ranks all possible consumption bundles in order of preference.
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2002 McGraw-Hill Higher Education