Exam 21: The Theory of Consumer Choice

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.

How are the following three questions related: 1) Do all demand curves slope downward? 2) How do wages affect labor supply? 3) How do interest rates affect household saving?

Figure 21-16 -Refer to Figure 21-16. The price of X is $5, the price of Y is $20, and the consumer's income is $40. Which point represents the consumer's optimal choice?

Which of the following represents a consumer's optimum?

Figure 21-18 -Refer to Figure 21-18. It would be possible for the consumer to reach I2 if

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

When the price of a normal good increases,

Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis. Suppose that you have $100 today and expect to receive $100 one year from today. Your money market account pays an annual interest rate of 25%, and you may borrow money at that interest rate. Suppose now that the interest rate increases to 40%. What happens to the slope of your budget constraint relative to when the interest rate was 25%? The slope

Suppose the only two goods that Charlie consumes are wine and cheese. When wine sells for $10 a bottle and cheese sell for $10 a pound, he buys 6 bottles of wine and 4 pounds of cheese - spending his entire income of $100. One day the price of wine falls to $5 a bottle and the price of cheese increases to $20 a pound, while his income does not change. The bundle of wine and cheese that he purchased at the old prices now costs

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. In moving from point A to point C, Steve gives up

Good X is a Giffen good. When the price of X increases, the consumer will consume