Exam 18: Consumer Theory With Indifference Curves

Suppose you are having a dinner party and you have 15 cans of cola in your refrigerator. Five are diet colas and the others are regular colas. A neighbor comes to you and ask you to trade some diet colas for regular colas. You agree to trade two diet colas for three regular colas. An hour later, the neighbor comes back and asks for two more diet colas. This time you agree to trade two diet colas for four regular colas. What property of indifference curves is illustrated by this example?

Indifference curves

As a consumer's income rises, her indifference curves shift outward.

A typical budget line is

Along a given indifference curve, marginal utility is constant.

Suppose Jane has $100 to spend on either compact disks, which cost $10 each, or hamburgers, which cost $2 each.

Indifference curves never intersect.

A decrease in income shifts the budget line outward from the origin.

The slope of the budget line is always positive.

The point on the budget line that reaches the greatest level of utility is that point where

As an individual consumer's income increases, that consumer's

Exhibit 5A-1 -Refer to Exhibit 5A-1. If income for this individual is $120 and the individual is consuming at point B, the price of X is ____ and the price of Y is ____.

At any point on an indifference curve for an individual consuming two goods, A and B, with A on the vertical axis and B on the horizontal axis, the slope is equal to

Other things being equal, if there is a price increase of a good measured on the vertical axis, the budget constraint shifts outward.

Suppose that a consumer has a choice between hotdogs and video games. All of the following can lead to a rotation of the consumer's budget line except a(n)

Derive a continuous individual demand curve using an indifference curve diagram and budget lines. Be careful to label your graphs completely.

A budget line identifies combinations of two goods that a consumer

For a given budget, a consumer is assumed to

A budget line indicates different combinations of two products that can be purchased by a consumer with a given budget.