Exam 8: Consumer Choice and Behavioral Economics

Table 8.1 Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3. Table 8.1 shows his total utility from different quantities of the two items. -Refer to Table 8.1.If Keegan can drink all the bubble tea he wants for free, how many glasses will he consume?

A fair number of people buy expensive gym memberships to commit themselves to exercising.Yet, data from health clubs show that many do not follow through with their intentions and end up losing money on their membership contracts.Which of the following could explain this behavior?

The income effect of a price increase causes a decrease in the quantity demanded of a normal good.

By hiring Justin Bieber to advertise its electronics Buy Back program, Best Buy is hoping to change its image and reach a new, younger target market.By using celebrities such as Bieber to endorse products, companies are hoping that its customers will respond positively and business will increase.All of the following are reasons why celebrity endorsements may increase sales for advertised products except

A consumer's indifference curves can never cross.

Economists would refer to the increase in product sales because of celebrity endorsements as being the result of

Figure 8.5 -Refer to Figure 8.5.A change in the price of candy only is shown in

Adhira buys chocolates and almonds.She has 3 bars of chocolates and 4 bags of almonds.The marginal utility of the third chocolate bar is 18 units of utility and the marginal utility from the fourth bag of almonds is also 18.Is Adhira maximizing her utility?

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of

Consider the following factors: a)culture b)religion c)customs d)prices e)income Which of the factors above are likely to influence the choices consumers make?

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

In the ultimatum game, allocators usually offer recipients at least a 40 percent share of the money, and recipients almost always reject offers of less than a 10 percent share.Which of the following does not explain why allocators offer recipients a relatively generous share and why recipients reject meager offers?

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

The observation that people tend to value something more highly when they own it than when they don't is called the

The absolute value of the slope of the budget constraint is equal to

For which of the following products is social influence likely to have the greatest impact?

What is a Giffen good?

Farah has $100 to spend each month on bread and chicken.Suppose the price of bread is $4 a loaf and the price of chicken is $5 per pound. a.Draw her budget constraint and label it BC₀.Put bread on the horizontal axis and chicken on the vertical axis.Be sure to identify the intercept values. b.Suppose Farah is a utility maximizer and she consumes 10 loaves of bread and 12 pounds of chicken.On the same graph you drew in part (a), draw an indifference curve to identify her optimal bundle.Label this bundle "E." c.Is her budget exhausted? Verify your answer. d.Now suppose Farah's income falls to so that she can now devote $80 to the two goods.Prices however remain unchanged.In the same diagram, graph her new budget constraint and label it BC₁.Be sure to identify any new intercept values. e.Following the change in income, can Farah consume the same bundle "E"? Explain your answer. f.What must happen to her total utility following the decrease in her income?