Exam 6: Consumer Choice and Behavioural Economics

Once a product becomes established, network externalities may create ________ costs that make consumers reluctant to buy a new product with better technology.

The amount of income a consumer has to spend on goods and services is known as

Arnold Kim began blogging about Apple products during his fourth year of medical school.Kim's website, MacRumors.com, became so successful that he decided to give up his medical career and work full time on his website, despite the nearly $200 000 he had invested in his education.In making his decision, Kim decided to ignore the money and time he spent on his education.Economists would say that Kim made a

Table 6.3 -Refer to Table 6.3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lemonade.The price of an ice cream cone is $2 and the price of Lemonade is $1.Use this information to select the correct statement.

If Ewan is consuming his utility maximising bundle and the price of one good falls, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do?

Why do firms pay famous individuals to endorse their products?

A common mistake made by consumers is the failure to take into account the sunk costs of their actions.

What happens if the price of lattes, a normal good that you enjoy, falls?

The economic model of consumer behaviour explains how consumers' tastes and preferences are formed.

Which of the following choices is true regarding utility?

Explain the endowment effect. __________________________________________________________________________________________________________________________________________________________________________________________

A common mistake made by consumers is

Suppose the consumer's income increases while the prices of the goods remain constant.Then the

Which of the following does not explain why consumers buy products that many other consumers are already buying?

What is the marginal rate of substitution?

Carolyn spends her income on popular magazines and music CDs.If the price of a CD is four times the price of a magazine and if Carolyn is maximising her utility, she buys

The income effect of an increase in the price of salmon

To maximise utility, consumers should buy goods and services to the point where the marginal utility of each item consumed is equal.

Figure 6.1 -Refer to Figure 6.1.Which of the following statements is true?

What does the economic model of consumer behaviour predict?