FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: The Theory of Consumer Choice

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

An optimizing consumer will select the consumption bundle in which the

A) ratio of total utilities is equal to the relative price ratio.
B) ratio of income to price equals the marginal rate of substitution.
C) marginal rate of substitution is equal to the relative price ratio of the goods.
D) marginal rate of substitution is equal to marginal utility.

E) C) and D)
F) A) and D)

Correct Answer

verified

Show Answer

Question 32

True/False

Review LaterAdd Note

Review Later

If a consumer purchases more of good X and good Y after her income increases,then neither good X nor good Y is an inferior good for her.

A) True
B) False

Correct Answer

verified

Show Answer

Question 33

Essay

Review LaterAdd Note

Explain the relationship between the budget constraint and indifference curve at a consumer's optimum.

The slope of a consumer's budget constraint is unaffected by a change in income.

Draw a budget constraint that is consistent with the following prices and income. Income = 200 P_Y = 50 P_X = 25 a.Demonstrate how your original budget constraint would change if income increases to 500. b.Demonstrate how your original budget constraint would change if P_Y decreases to 20. c.Demonstrate how your original budget constraint would change if P_X increases to 40.

Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan.

Figure 21-14 -Refer to Figure 21-14.Which of the graphs shown represent indifference curves for perfect complements?

Figure 21-17 -Refer to Figure 21-17.Bundle D represents a point where

If a consumer purchases more of good B when his income rises,good B is an inferior good.

Figure 21-1 -Refer to Figure 21-1.All of the points identified in the figure represent affordable consumption options with the exception of

A consumer's budget constraint for goods X and Y is determined by how much the consumer likes good X relative to good Y.

If we observe that a consumer's budget constraint has shifted inward,we can assume that the consumer will buy

A consumer has preferences over two goods,X and Y.Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis.At the consumer's current consumption bundle,the consumer is spending all available income,and the marginal rate of substitution is greater than the slope of the budget constraint.We can conclude that the consumer

A consumer's optimal choice is affected by income,prices of goods,and preferences.

If an increase in the interest rate raises savings,then

Figure 21-3 In each case,the budget constraint moves from BC-1 to BC-2. -Consider two goods,books and CDs.The slope of the consumer's budget constraint is measured by the

Using indifference curves and budget constraints,graphically illustrate the substitution and income effect that would result from a change in the price of a normal good.

Figure 21-10 -Refer to Figure 21-10.When comparing bundle A to bundle E,the consumer

The goal of the consumer is to

Figure 21-3 In each case,the budget constraint moves from BC-1 to BC-2. -A budget constraint shows