Exam 6: Consumer Choice and Behavioural Economics

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good, with an income effect larger than its substitution effect, a good must be ________ and make up a ________ portion of a consumer's budget.

What are the two effects of a change in the price of a good on the quantity consumed?

Which of the following statements describes economists' attitudes regarding the influence of social factors on the choices consumers make?

What does the marginal rate of substitution measure?

Terence has $50 per week to spend on Subway sandwiches and milkshakes.The price of a Subway sandwich is $5 and the price of a milkshake is $4.He buys 6 sandwiches and 5 milkshakes.The marginal utility of the 6th sandwich = 25 and the marginal utility of the 5th milkshake = 24.Which of the following is true?

The word 'util' has been used by economists in the past as an objective measure of utility.Today economists believe that

How do consumers maximise total utility within their budget constraint?

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

Table 6.5 -Refer to Table 6.5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for burgers and sushi rolls.Assume that the price of the burgers is $4 and the price of sushi rolls is $2.When Harry's income is $14 he buys two burgers and three sushi rolls.The last column lists the values of the marginal utility per dollar for sushi rolls when the price of sushi rolls decreases to $1.Complete this statement: As a result of the change in price, the marginal utility of each sushi roll Harry consumes increases, and

Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea.The price of a pineapple is $4 and the price of a bottle of green tea is $2.The table below shows Arnie's utility values.Use the table to answer the questions that follow the table. a.Complete the table by filling in the blank spaces. b.Suppose Arnold purchases 4 pineapples and 2 bottles of green tea.Is he consuming the optimal consumption bundle? If so, explain why.If not, what combination should he buy and why? __________________________________________________________________________________________________________________________________________________________________________________________

Figure 6.5 Manuri has $300 to spend on Pilates classes and Yoga classes.The price of a group Pilates class is $20 and the price of a group Yoga class is $10.Manuri's optimal bundle is given by 'A' in Figure 6-5. -Refer to Figure 6.5.Suppose the price of Pilates sessions rises to $30 while income and the price of Yoga sessions remain unchanged.What is her new optimal bundle?

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Days of Future Past.On the day of the movie you decide that you would rather not go to the movie.According to economists, what is the rational thing to do?

Figure 6.7 -Refer to Figure 6.7.Consider the budget constraint BC₁.If the price of DVDs is $20 and the price of CDs is $10, what is the consumer's income?

What is the restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available?

An item has utility for a consumer if it

Some online penny auctions charge a fee, such as $1, for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has 'already invested $5 in bidding costs' to keep bidding to 'protect his or her sunk investments'? Why or why not? __________________________________________________________________________________________________________________________________________________________________________________________

There are two conditions necessary for a consumer to maximise her utility.One is that the marginal utilities per dollar spent on each good and service consumed are equal.What is the other condition?

To what does the income effect of a price change refer?

Suppose your marginal utility from consuming the 3rd slice of cake is zero; then your total utility from consuming cake is

The order of the letters along the rows of computer keyboards could be changed to allow users to type faster, but this would inconvenience the vast majority of people who learned to type with the current keyboard layout.The costs of switching to a new layout make this change unlikely.This is an example of