Exam 5: The Demand Curve and the Behavior of Consumers

If price and marginal benefit are equal for an individual, and preferences and income do not change, the individual can be induced to buy more of a good only by

Does an increase in income always increase demand? Why or why not?

For most goods, the marginal utility of additional units consumed of almost any good

The following table shows David's willingness to pay for ice cream.

The market demand curve is derived by adding the different prices that consumers pay at a given quantity demanded.

Consumer surplus applies only to market demand, not individual demand.

Exhibit 5-9 -Refer to Exhibit 5-9. When price is P2, consumer surplus is the numbered area

If the marginal utility of consuming one pound of apples is 200 units for John and 50 units for Jane, we can conclude

After consuming five units of a good, the price that a consumer is willing to pay for the sixth unit is equal to the average benefit of the first five units of the good.

Exhibit 5-8 -Consumer surplus is the difference between

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

Utility maximization implies that the total utility of the consumer can be maximized only when the price of a good increases.

When there is an increase in the consumption of one good and a decrease in the consumption of another, utility

What is the difference between the income effect and substitution effect of a change in the price of a good?

The budget line rotates when a consumer's budget increases.

The income effect of a change in the price of a good is illustrated by a shift of the demand curve.

An increase in the income of a family raises the slope of the family's budget constraint.

An increase in income

Exhibit 5-3 -In utility analysis, it is assumed that marginal utility decreases as consumption of a product decreases.