Exam 6: Consumer Behaviour

FIGURE 6- 1 -Refer to Figure 6- 1. The total utility from consuming two units of the good is

Assume the quantity of good X is measured on the horizontal axis and the quantity of good Y on the vertical axis. Initial prices are PX = $5 and PY = $10. The consumer's income is $100. If PY increases to $20, then

The table below shows the total value (in dollars) that Andrew gets from playing 9- hole rounds of golf. Rounds of Golf per Month Total Value (\ ) 0 0 1 40 2 70 3 92 4 108 5 120 6 130 7 130 TABLE 6- 3 -Refer to Table 6- 3. Andrew values the 4th round of golf at a marginal value of .

Since there is a relatively plentiful supply of water in Canada (this is not true in many parts of the world), the consumption of water in Canada

If total utility is increasing as more units are consumed, then marginal utility must be

Sophie consumes two goods - paperback novels and visits to the movies. FIGURE 6- 11 -Refer to Figure 6- 11. Sophie's movement from point A to point B is the

Christine is allocating her household expenditure between cleaning services and gardening services in order to maximize the household's total utility. For the quantities of cleaning and gardening services she has chosen, an increase in the price of cleaning service will, ceteris paribus,

Consider a consumer who divides his income between spending on good X and good Y. The opportunity cost of good X in terms of good Y is reflected by the

At a garage sale, Ken purchases a used bicycle for $8 when he was willing to pay $25. If the bicycle costs $75 new, Ken's consumer surplus is .

Suppose a consumer can purchase only two goods, beef and chicken. If the price of beef falls (with all other variables held constant), and the consumption of chicken increases, we can conclude that the increased consumption of chicken is due to

FIGURE 6- 4 -Refer to Figure 6- 4. For both goods, the price increases from P0 to P1. The substitution effect is illustrated by the change in quantity demanded from A to B; the income effect is illustrated by the change in quantity demanded from B to C. Good X is certainly a(n) good.

In economics, the term "utility" is defined as the

FIGURE 6- 1 -Refer to Figure 6- 1. The marginal utility of the second unit of the good consumed is

The "law" of diminishing marginal utility implies that the

If the price of a normal good changes, the income effect of the price change will

FIGURE 6- 6 -Refer to Figure 6- 6. Suppose that price is P0. The market value of the quantity purchased is given by the area

The condition required for a consumer to be maximizing utility, for any pair of products, X and Y, is

$\text { Toffee (bars) \quad Cashews (bags) }$ Units Marginal Utility Total Utility Marginal Total Utility Utility 1 10 10 12 12 2 8 18 10 22 3 5 23 7 29 4 3 26 5 34 5 1 27 2 36 6 0 27 1 37 7 0 27 0 27 $\text { TABLE 6- } 1$ -Refer to Table 6- 1. The maximum utility that a consumer can obtain from toffee bars and bags of cashews per week is

FIGURE 6- 6 -Refer to Figure 6- 6. Suppose that price is P0. Total consumer surplus is then given by the area

The substitution effect is