Exam 5: Consumer Choice: Individual and Market Demand

A consumer has maximized her total utility (as measured in money)when, at the quantity of each good chosen

Figure 5-13 -​ If a consumer is currently at Point E on Figure 5-13, she will

Total utility will be at its maximum when

-Figure 5-5 shows a consumer budget line for French fries and hamburgers. The household allocates a budget for these two goods. If the price of an order of french fries is $2, how much income is allocated to fries and burgers combined?

What would happen to the budget line if income as well as prices of both goods increase by the same percentage?

The host at a party offers Justin a sixth beer. Justin says, "No thanks, man. The marginal utility of that fifth beer was, like, 20 cents, but the marginal utility of the sixth would be minus 10 cents." If Justin consumes the sixth beer, his total utility will

The budget line and the indifference curve are geometric devices used to provide a closer look at consumer choice.

If a commodity is inexpensive and its total utility is great,

In Figure 5-7, budget line B compared to A clearly shows that the

A consumer will consume the combination of goods at the crossing point of a budget line and indifference curve.

Because of diminishing marginal utility, total utility always decreases when additional amounts of a commodity are consumed.

Figure 5-3 Assume the market consists of three consumers with the demand curves in Figure 5-3. At a price of 1, the total market demand is

Table 5-1 Table 5-1 gives information on George's total utility from consuming milkshakes and sandwiches. If George's income this week is $15, milkshakes are $3 each, and sandwiches $2, he will maximize his utility if he buys

Figure 5-12 In Figure 5-12, the move in the consumer equilibrium from A to B shows that

An increase in a consumer's income will always increase the demand for a good.

The slope of an indifference curve is called the

Figure 5-13 -​ In Figure 5-13, the slope of the budget line (dropping all minus signs)equals

Rolls-Royce may actually sell fewer cars at lower prices due to the "snob effect."

Net utility is

Use consumer indifference curves and budget lines to illustrate the effects of an increase in income for a normal good and an inferior good (use two graphs). Be sure your diagrams are fully and correctly labeled.