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If a consumer’s income decreases, what will happen to the budget line?
Correct answer(s):
- It will shift inward
Given that income is $500 and PX = $20 and PY = $5, what is the market rate of substitution between goods X and Y?
Correct answer(s):
- -4
Given that income is $200 and the price of good Y is $40. What is the vertical intercept of the budget line?
Correct answer(s):
- 5
The upper boundary of the budget set is the:
Correct answer(s):
- Budget line
What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and PX = $5, PY = $10, X = 20, and M = 500?
Correct answer(s):
- 40
The combinations of goods X and Y that are affordable to the consumer are defined by the:
Correct answer(s):
- Budget set
The idea that a consumer is limited to selecting a bundle of goods that is affordable is captured by the:
Correct answer(s):
- Budget constraint
The property that rules out indifference curves that cross is:
Correct answer(s):
- Transitivity
The property that implies that indifference curves are convex to the origin is:
Correct answer(s):
- Diminishing marginal rate of substitution
An increase in the price of good X will have what effect on the budget line on a normal X-Y graph?
Correct answer(s):
- Decrease the horizontal intercept
The absolute value of the slope of the indifference curve is called the:
Correct answer(s):
- Marginal rate of substitution
The affordable bundle that yields the greatest satisfaction to the consumer is:
Correct answer(s):
- The equilibrium consumption bundle
A situation where a consumer says he does not know his preference ordering for bundlesX and Y would violate the property of:
Correct answer(s):
- Completeness
The possible goods and services a consumer can afford to consume represents the:
Correct answer(s):
- Consumer opportunities
What is/are the important things that must be developed when characterizing consumer behavior?
Correct answer(s):
- Consumer preferences and consumer opportunities
Individuals who purchase services and goods for the purpose of consumption are:
Correct answer(s):
- Consumers
If the price of good X is $10 and the price of good Y is $5, how much of good X would the consumer purchase if her income is $15?
Correct answer(s):
- Cannot tell based on the above information
Which of the following is true?
- Indifference curves may intersect
- At a point of consumer equilibrium, the MRS equals 1
- If income increases, a consumer will always consume more of a good
- None of the statements associated with this question are correct
Correct answer(s):
- None of the statements associated with this question are correct
Joe prefers a three pack of soda to a six-pack. What properties does this preference violate?
Correct answer(s):
- More is better
The difference between a price decrease and an increase in income is that
Correct answer(s):
- An increase in income does not affect the slope of the budget line while a decrease in price does change the slope