Exam 10: Consumer Choice and Behavioral Economics

Table 10-1 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 10-1 shows his total utility from different quantities of the two items. -Refer to Table 10-1.If Keegan can drink all the bubble tea he wants for free,how many glasses will he consume?

If a consumer receives 20 units of utility from consuming two candy bars,and 25 units of utility from consuming three candy bars,the marginal utility of the third candy bar is

Marginal utility can be

If Dawson prefers pizza to hamburgers and hamburgers to hot dogs,then if preferences are transitive,

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

What is the marginal rate of substitution?

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

Figure 10-5 -Refer to Figure 10-5.A change in the price of popcorn only is shown in

List three reasons why demand for a product will often increase if the product is endorsed by a celebrity.

Total utility

A Giffen good could be either a normal good or an inferior good.

Sunk costs

Figure 10-6 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 9-6. -Refer to Figure 10-6.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?

What is marginal utility and what is the law of diminishing marginal utility?

In order to derive an individual's demand curve for salmon,we would observe what happens to the utility-maximizing bundle when we change

The marginal rate of substitution is determined by the slope of an indifference curve.

Marginal utility is the

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?

Gowri has $6 per day to purchase lunch.She spends all of her lunch money on pizza and iced-tea.The price of pizza is $2.00 per slice and iced-tea costs $1 per bottle. a.Draw Gowri's budget constraint and label it BC₀.Put pizza on the horizontal axis and iced-tea on the vertical axis.Be sure to identify the intercept values. b.If the price of iced-tea rises to $1.20 per bottle,show what will happen to her budget constraint in your diagram.Be sure to indicate any new intercept values.

If the price of muffins,a normal good you enjoy,rises,