Exam 9: Possibilities, Preferences, and Choices

-Consider the change in the price of a book depicted in the above figure. The original budget line is BC. The new budget line is BD. As a result of this price change, the income effect can be represented by a movement from

-In the above figure, the budget line would rotate in the direction indicated as a result of a

The budget line ________.

The price of one good changes and Sue is now at a point on her indifference curve where the marginal rate of substitution exceeds the relative price. Sue will now choose to buy ________ of the good that is measured on the ________.

-When your income increases,

A recent article suggests that the introduction of the new iPhone 5 increased the demand for iPhone protective cases. The article suggests that these two goods are

-A consumer is in equilibrium when the consumption point is on

Wendy spends $30 a week on movies and magazines. The price of a movie is $8, the price of a magazine is $2, and Wendy sees 3 movies a week and buys 3 magazines. The price of a magazine now increases to $4 and Wendy's brother gives her $6 a week so that she can still see 3 movies a week and buy 3 magazines. In this situation, Wendy will see ________ movies and buy ________ magazines.

-The effect of a change in price on the quantity bought while keeping the consumer on the same indifference curve, is called the

-The figure above gives your budget line for magazine and CDs per month. Given that your income equals $60 per month, what is your real income in terms of magazines?

-Given the budget line in the above figure, if income is $60, then the price of a pizza is ________ and the price of a CD is ________.

-Suppose Sam plans to buy only popcorn and soda. He has $40 to spend per week. A change in which of the following variables will change Sam's consumption possibilities? I. price of popcorn II) income III) preferences IV) utility

-The figure illustrates Sally's budget line and her preferences. At point(s) ________, the marginal rate of substitution is equal to the relative price.

-In the above figure, if income is $8, the initial price of a soft drink is $1, and the initial price of a milkshake is $2, a decrease in the price of a milkshake to $1 will move the consumer from point ________ to point ________.

-If the indifference curves between two goods are L-shaped, the goods are

-The above figure shows Sam's budget line and one of his indifference curves. What combination of coffee and gasoline will Sam select?

Goods that can be bought in any quantity desired are called

-Given the budget line in the above figure, what is the household's real income in terms of pizzas per month?

-In the figure above, Sam originally selects his consumption bundle at point A with 3 pounds of olives and 4 pounds of pickles a year. Then the price of pickles rises and the price of olives falls so that his budget line rotates but it still goes through point A. At point A, the slope of the indifference curve I₁ ________ the slope of the new budget line.

-Lizzie's budget line is shown in the figure above. Lizzie's real income in terms of cookies is ________ cookies.