Exam 9: Possibilities, Preferences, and Choices

A recent article by the Associated Press examined the effect higher gas prices have on the consumption of other goods. It said that the increase in the price of gasoline has decreased the quantity of other goods, such as food, that people consume. (Source: Associated Press, September 28, 2012) -If consumers spend their income either on gasoline or food, then an increase in the price of gasoline rotates the budget line

-In the above figure, if the price of milk rises, the budget line

An indifference curve diagram has movies on the vertical axis and sodas on the horizontal. As the consumption of sodas increases and movies decreases (moving southeast along an indifference curve) the marginal rate of substitution of sodas for movies

-In the table above, in terms of units of hamburgers, real income is

-In the above figure, when the price of a gallon of gasoline falls, which points in the above figure are used to derive points on the consumer's demand curve for gasoline?

When your budget line is just tangent to your indifference curve, you are at your best affordable point.

Real income measures the

During October and November 2008, gasoline prices were falling dramatically making travel by car less expensive but air travel prices were as high as ever. If travel by car is less expensive, and income remains the same, describe the substitution and income effects that occur for travelling by car.

-The price effect refers to how changes in

Bobby moves along an indifference curve for shirts and pants by increasing consumption of shirts and decreasing consumption of pants. As Bobby has more and more pants, the number of shirts he is willing to trade for yet another pair of pants

Nick consumes two goods, chips and lemonade. Located on the x-axis is the quantity of chips and on the y-axis is the quantity of lemonade. The magnitude of the slope of the budget line equals the

-Joe has $50, which he spends on movies and pizza. If the price of a pizza falls, Joe can

-The above figure shows Jane's budget line and two of her indifference curves. If the price of a lobster dinner falls so that Jane can now purchase the combination represented by Point B, Jane would experience

According to the substitution effect along an indifference curve, when the relative price of a good falls, the consumer ________ substitutes ________ of that good for the other good.

-Waldo buys only two items, pretzels and ham sandwiches. Waldo has $24 in income, pretzels cost $0.60 per bag and ham sandwiches cost $2.40 each. If Waldo's budget line is constructed with ham sandwiches along the horizontal axis and bags of pretzels along the vertical axis, then

-The above figure shows Katie's consumption possibilities. The relative price of a restaurant meal is

-The figure above shows Sam's budget line. Which of the following equals the slope of Sam's budget line?

-As Judy moves down along her budget line, ________.

Which of the following statements is true?

-If money income increases, a consumer's budget line