Exam 8: Utility and Demand

Ben spends $50 a year on 2 bunches of flowers and $50 a year on 10,000 litres of tap water.Ben is maximizing utility and his marginal utility from water is 0.5 units per litre.Ben's expenditure on flowers and water illustrates the paradox of value because Ben's marginal utility from flowers is ________ his marginal utility from water,and his total utility from flowers is ________ than his total utility from water.

Diminishing marginal utility means that

The fact that your fourth slice of pizza does not generate as much satisfaction as your third slice is an example of

Danny has $12 to spend on two goods: pies and pop.The price of a pie is $4,and the price of a can of pop is $2.To maximize his utility,Danny buys

Behavioural economics

Total utility is always

Marginal utility theory predicts that a rise in the price of a banana results in

A behavioural economist will explain Tom's donation to charity by saying that Tom is displaying

Chuck and Barry have identical total utility schedules but Chuck has a much higher income.If each is maximizing his total utility,then

Martha and Sarah have the same preferences,face the same prices,and have the same income.Sarah's utility is measured in units while Martha's is measured in units squared.Select the best response.

Billy likes candy and popcorn.Candy sells for $0.50 a bag and popcorn sells for $1 per bag.Currently he is in consumer equilibrium.Then the price of candy rises to $1 a bag.Which statement is true in the new consumer equilibrium?

Consider Devon's total utility from snorkeling and windsurfing in Table 8.3.1.Suppose Devon's total income is $35.If the price of windsurfing rises to $20 per hour,what is Devon's price elasticity of demand for windsurfing?

The three limitations on human rationality that behavioural economics emphasizes are

Samir consumes apples and bananas and is in consumer equilibrium.The marginal utility from his last apple is 10 and the marginal utility from his last banana is 5.If the price of an apple is $0.50,then what is the price of a banana?

Billy likes chocolate bars and popcorn.Chocolate bars sell for $1.50 each and popcorn sells for $3 a bag.Currently he is in consumer equilibrium with marginal utility per dollar on popcorn equal to 100.What is the marginal utility per dollar on chocolate bars?

Use the table below to answer the following question. Table 8.2.4 -Refer to Table 8.2.4.Suppose the price of X is $1 and the price of Y is $1.How much of each should you purchase to maximize utility from a total expenditure of $11?

When total utility is increasing,marginal utility

Neuroeconomics studies all of the following concepts except

Marginal utility theory predicts that when a consumer's income decreases,the consumer

When Kathryn is at her consumer equilibrium,she is