Exam 7: Slutsky Equation-Part A

Explore all topics

Charlie's utility function is x_Ax_B.The price of apples used to be $1, the price of bananas used to be $2, and his income used to be $40.If the price of apples increased to $6 and the price of bananas stayed constant, the substitution effect on Charlie's apple consumption would reduce his consumption by

(Multiple Choice)

4.7/5

(77)

Question 21

John purchases two goods, x and y.Good x is an inferior good for some range of income.There must be another range of income for which good x is a normal good.

(True/False)

4.9/5

(79)

Question 22

If a good is an inferior good, then an increase in its price will increase the demand for it.

(True/False)

4.9/5

(79)

Question 23

Suppose a consumer has strictly convex preferences and her Engel curve for a good is a vertical line for some range of income.In that same income range, her demand curve for the good slopes down.

(True/False)

4.9/5

(77)

Question 24

The Hicks version of the substitution effect of a price change measures the change in a consumer's demand if the consumer's income were changed just enough so the consumer would remain on the same indifference curve as before the price change.

(True/False)

4.8/5

(74)

Question 25

Cindy consumes goods x and y.Her demand for x is given by x(p_x, m)= 0.04m -4.24p_x.Now her income is $322, the price of x is $2, and the price of y is $1.If the price of x rises to $3 and if we denote the income effect on her demand for x by DI and the substitution effect on her demand for x by DS, then

(Multiple Choice)

4.7/5

(92)

Question 26

An increase in the price of a Giffen good makes the people who consume that good better off.

(True/False)

5.0/5

(81)

Question 27

A rational consumer prefers more of good x to less.If the price of good x rises and the prices of all other goods remain constant, then the consumer must necessarily demand less of x.

(True/False)

4.7/5

(91)

Question 28

Neville from your workbook has a friend named Cedric.Cedric has the same demand function for claret as Neville, namely q = .02m - 2p, where m is income and p is price.Cedric's income is $6,000 and he initially had to pay a price of $40 per bottle of claret.The price of claret rose to $60.The substitution effect of the price change

(Multiple Choice)

4.9/5

(79)

Question 29

Charlie's utility function is x_Ax_B.The price of apples used to be $1 per unit and the price of bananas was $2 per unit.His income was $40 per day.If the price of apples increased to $2.25 and the price of bananas fell to $1.25, then in order to be able to just afford his old bundle, Charlie would have to have a daily income of

(Multiple Choice)

4.8/5

(77)

Question 30

If the Engel curve slopes up, then the demand curve slopes down.

(True/False)

4.7/5

(80)

Question 31

Jessica's preferences for peanut butter and jelly are represented by the utility function U(p, j)= min{2p, 5j}.If prices and income change, but her old consumption bundle lies somewhere on her new budget line, she will not change her consumption.

(True/False)

4.8/5

(78)

Question 32

The compensated demand function refers to the demand function of someone who is adequately paid for what he or she sells.

(True/False)

4.9/5

(81)

Question 33

A taxpayer says, "Sure I pay a lot of income tax, but I don't mind because I get back just as much money as I pay in." Assuming that his facts are correct, explain why the taxpayer's reasoning is faulty.Use a diagram to show that an income tax can make a person worse off even if he is rebated an amount of money equal to what he paid in.

(Essay)

4.8/5

(73)

Question 34

Polly consumes crackers and fruit.The price of fruit rose and the price of crackers stayed constant.The income effect on Polly's demand is

(Multiple Choice)

4.7/5

(84)

Question 35

Cindy consumes goods x and y.Her demand for x is given by x(p_x, m)= 0.05m =5.15p_x.Now her income is $419, the price of x is $3, and the price of y is $1.If the price of x rises to $4 and if we denote the income effect on her demand for x by DI and the substitution effect on her demand for x by DS, then

(Multiple Choice)

4.8/5

(80)

Question 36

In 2000, Bruce spent his income on two goods, x and y.Between 2000 and 2001, the price of good x rose by 8% and the price of good y rose by 8%.In 2001, Bruce bought the same amount of x as he bought in 2000, but he bought more of good y than he had bought in 2000.

(Multiple Choice)

4.9/5

(68)

Question 37

Goods 1 and 2 are perfect complements and a consumer always consumes them in the ratio of 2 units of good 2 to 1 unit of good 1.If a consumer has an income of $120 and if the price of good 2 changes from $3 to $4, while the price of good 1 stays at $1, then the income effect of the price change

(Multiple Choice)

5.0/5

(81)

Question 38

Draw two different diagrams, one illustrating the Slutsky version of income and substitution effects and the other illustrating the Hicks version of income and substitution effects.How do these two notions differ?

(Essay)

4.9/5

(79)

Question 39

Rob consumes two goods, x and y.He has an allowance of $50 per week and is not endowed with either of the goods.If the price of good x increases and his substitution and income effects change demand in opposite directions,

(Multiple Choice)

4.9/5

(70)

Question 40

Showing 21 - 40 of 51

Exam 7: Slutsky Equation-Part A

John purchases two goods, x and y.Good x is an inferior good for some range of income.There must be another range of income for which good x is a normal good.

If a good is an inferior good, then an increase in its price will increase the demand for it.

Suppose a consumer has strictly convex preferences and her Engel curve for a good is a vertical line for some range of income.In that same income range, her demand curve for the good slopes down.

The Hicks version of the substitution effect of a price change measures the change in a consumer's demand if the consumer's income were changed just enough so the consumer would remain on the same indifference curve as before the price change.

An increase in the price of a Giffen good makes the people who consume that good better off.

A rational consumer prefers more of good x to less.If the price of good x rises and the prices of all other goods remain constant, then the consumer must necessarily demand less of x.

If the Engel curve slopes up, then the demand curve slopes down.

Jessica's preferences for peanut butter and jelly are represented by the utility function U(p, j)= min{2p, 5j}.If prices and income change, but her old consumption bundle lies somewhere on her new budget line, she will not change her consumption.

The compensated demand function refers to the demand function of someone who is adequately paid for what he or she sells.

Polly consumes crackers and fruit.The price of fruit rose and the price of crackers stayed constant.The income effect on Polly's demand is

In 2000, Bruce spent his income on two goods, x and y.Between 2000 and 2001, the price of good x rose by 8% and the price of good y rose by 8%.In 2001, Bruce bought the same amount of x as he bought in 2000, but he bought more of good y than he had bought in 2000.

Goods 1 and 2 are perfect complements and a consumer always consumes them in the ratio of 2 units of good 2 to 1 unit of good 1.If a consumer has an income of $120 and if the price of good 2 changes from $3 to $4, while the price of good 1 stays at $1, then the income effect of the price change

Draw two different diagrams, one illustrating the Slutsky version of income and substitution effects and the other illustrating the Hicks version of income and substitution effects.How do these two notions differ?

Rob consumes two goods, x and y.He has an allowance of $50 per week and is not endowed with either of the goods.If the price of good x increases and his substitution and income effects change demand in opposite directions,

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part A

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A