Exam 9: Possibilities, Preferences, and Choices

The initial budget equation for pop (p)and movies (m)is Qp = 20 - 4Qm, and the price of a pop is $5. If the price of a pop falls to $4, what is the new budget equation?

A rise in the price of gasoline, everything else remaining the same, ________ the relative price of a restaurant meal and ________ real income in terms of restaurant meals.

Use the figure below to answer the following questions. Figure 9.3.3 -Consider an initial budget line labelled RS in Figure 9.3.3. The budget line becomes RT with

Use the figure below to answer the following questions. Figure 9.3.4 Original equilibrium at A, new equilibrium at B -Refer to Figure 9.3.4. Which graphs show the case where good Y is a normal good?

Which statement is true for a normal good?

For a normal good, the income effect

If two consumption points are on different indifference curves, then one point is

Use the figure below to answer the following questions. Figure 9.1.2 -Refer to Figure 9.1.2. Which budget line shows the greatest real income in terms of carrots?

Use the figure below to answer the following questions. Figure 9.2.1 -Which of the graphs in Figure 9.2.1 shows perfect substitutes?

Moving down along a given budget line, real income

Martha consumes cake and muffins. Suppose Martha's income doubles and the prices of cake and muffins also double. Martha's budget line

Larry consumes only beer (B)and chips (C). His real income in terms of chips is

Which of the following is not relevant when calculating the budget line?

A preference map is

Use the information below to answer the following questions. Fact 9.3.2 Boom Time for "Gently Used" Clothes Most retailers are blaming the economy for their poor sales, but one store chain that sells used name-brand children's clothes, toys, and furniture is boldly declaring that an economic downturn can actually be a boon for its business. Last year, the company took in $20 million in sales, up 5% from the previous year. Sales are already up 5% this year. Source: CNN, April 17, 2008 -Refer to Fact 9.3.2. According to the news clip, used clothing is ________ good. If the price of used clothing falls and income remains the same, the quantity of used clothing bought ________.

Which one of the following is true at the best affordable choice of a consumer?

Larry consumes only beer (B)and chips (C). The magnitude of the slope of his budget line (with beer measured on the vertical axis)is

The price of a good increases relative to other goods. Which one of the following statements must be true? The resulting

Use the figure below to answer the following questions. Figure 9.1.2 -Refer to Figure 9.1.2. Which budget line shows the greatest real income in terms of compact discs?

Use the information below to answer the following questions. Fact 9.2.1 You May Be Paid More (or Less)Than You Think It's so hard to put a price on happiness, isn't it? But if you've ever had to choose between a jobs you like and a better-paying one that you like less, you probably wished some economist would tell you how much job satisfaction is worth. Trust in management is by far the biggest component to consider. Say you get a new boss and your trust in management goes up a bit (say, up 1 point on a 10-point scale). That's like getting a 36 percent pay raise. In other words, that increased level of trust will boost your level of overall satisfaction in life by about the same amount as a 36 percent raise would. Source: CNN, March 29, 2006 -Refer to Fact 9.2.1. The news clip implies that the marginal rate of substitution is ________, which is likely ________ implication.