Exam 25: Consumer Choice

Use the following to answer question 13: Figure: Water vs. Soda 2 -(Figure: Water vs. Soda 2) Refer to the figure. These figures show the marginal utility Janet receives when she consumes bottled water and soda. Both water and soda cost $1 each. If Janet has $5 in income, what mix of bottled water and soda will maximize Janet's utility?

As one moves down along an indifference curve, the slope of the indifference curve typically:

By assuming diminishing marginal utility, we mean that:

Use the following to answer questions: Figure: Income and Substitution Effects -(Figure: Income and Substitution Effects) Refer to the figure. What caused this consumer to switch optimal consumption bundles from Bundle A to Bundle B?

If the price of good X is $10 and price of good Y is $15, the slope of the budget constraint is -1.5.

If another unit of good X gives a consumer 15 additional units of satisfaction, and another unit of good Y gives 45 additional units of satisfaction, the MRS is equal to 1/3.

If an individual's labor supply curve is downward sloping, this indicates that:

If the budget constraint shifts northeast or away from the origin, the consumer can afford:

Use the following to answer questions: Figure: Water vs. Soda -(Figure: Water vs. Soda) Refer to the figure. The figure represents the marginal utility Janet receives when she consumes bottled water and soda. The prices of bottled water and sodas are both $1 each. Janet has $2 to spend and consumes two bottles of water and no soda.

An increase in the price of a good leads to a(n) ______ in the marginal utility per dollar of that good, and thus a(n) ______ in the quantity purchased.

Constant marginal utility means that one's first apple in a sitting is ______ one's second apple in the same sitting.

Assume that the unit price of good A is $3, and the unit price of good B is $5. If an individual has income of $43, which consumption bundles of (good A, good B) is on the edge of the budget constraint?

Use the following to answer questions: Figure: Income and Substitution Effects -(Figure: Income and Substitution Effects) Refer to the figure. The consumer is initially in equilibrium at Point A then moves to Point B. What is the income effect from the price change?

The conventional demand curve appears strange to many students since the dependent variable (quantity) is on the vertical axis and the independent variable (price) is on the horizontal axis. We generally describe our demand as "If apples cost $1, then I'd be willing to buy four apples" instead of "If I want four apples, then I'd be willing to pay $1 per apple." Which concept reframes the dependent and independent variables so the orientation is more intuitive?

When the price of a good changes, ______ influence(s) the change in consumption.

Which statement is TRUE?

Assume that the unit price of good A is $2, and the unit price of good B is $5. If an individual has income of $30, which consumption bundles of (good A, good B) is on the edge of the budget constraint?

The demand curve is downward sloping due to diminishing marginal utility.

Consumption Bundle A contains 6 donuts and 2 cups of coffee, and consumption Bundle B contains 4 donuts and 1.5 cups of coffee. Bundle A and Bundle B could lie on the same indifference curve.

Use the following to answer questions: Figure: Indifference Curve 2 -(Figure: Indifference Curve 2) Refer to the figure. Which statement is true?