Exam 9: Possibilities, Preferences, and Choices

-In the above figure, Brendan originally consumes at point A. If his income rises and both compact discs and haircuts are normal goods then he could begin consuming at point

A relative price is the

-In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the price of a milkshake decreases to $1, the income effect is the movement from point ________ to point ________.

-When oranges increase in price, the income effect

Real income equals a household's income

-The figure above shows a preference map for Sarah, who likes hamburgers and milk shakes. a) Which two combinations contain the same amount of hamburgers but different quantities of shakes? b) Which combination(s) does Sarah most prefer? Why? c) Which combination(s) does Sarah least prefer? Why? d) Between which combinations is Sarah indifferent? Why?

Larry consumes at a point on his budget line where his marginal rate of substitution is less than the magnitude of the slope of his budget line. As Larry moves toward his consumer equilibrium point, he will move to a

If Bill thinks tacos and turkey sandwiches are perfect substitutes, then his indifference curves for these two goods

-An indifference diagram has movies on the vertical axis and sodas on the horizontal axis. As the consumption of sodas increases, the marginal rate of substitution ________ and the indifference curve becomes ________.

-Consumers' preferences are represented by

Jake plans to spend $100 on fried chicken and Pepsi. The price of a fried chicken is $5 and Pepsi is $2 per bottle. If Jake buys 10 fried chickens how many bottles of Pepsi can he buy?

-Lizzie's preferences are shown in the figure above. Lizzie is just as happy to have ________ as she is to have ________.

Why do consumers prefer higher indifference curves (farther to the right) to lower indifference curves?

-The figure above shows Tanya's consumption possibilities. Which of the following combinations of goods is not affordable?

-Nadya spends $200 a year to buy computer games and Barbie dolls. The price of a computer game is $20 and the price of a Barbie doll is $10. The figure above illustrates Nadya's preferences. What combination of computer games and Barbie dolls does Nadya buy?

In order to draw an individual's budget line, we must know

If the price of peanuts increases by 10 percent and the price of potato chips does not change, then the relative price of peanuts with respect to potato chips will ________ and the relative price of potato chips with respect to peanuts will ________.

Suppose that Dave has $200 to spend per week and he buys only magazines and pizza. The price of a pizza is $10 and the price of a magazine is $5. What is the maximum amount of pizza Dave can buy each week?

-Jane spends her monthly dining-out budget of $300.00 on either steak or lobster dinners. Using the above figure, what is the price of a steak dinner?

-In the above figure, at the best affordable point, the marginal rate of substitution is