Exam 6: Consumer Behaviour

The figures below show Chris's consumption of specialty coffee per week. FIGURE 6- 9 -Refer to Figure 6- 9. Suppose Chris's income is such that he is able to buy no more than 10 specialty coffees per week. If Chris is maximizing his utility at this level of income, how many specialty coffees is he consuming per week?

FIGURE 6- 1 -Refer to Figure 6- 1. Total utility is at its maximum when marginal utility is

A parallel shift in the consumer's budget line always indicates a change in

The marginal rate of substitution

Economists usually assume that consumers

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

FIGURE 6- 5 -Refer to Figure 6- 5. Suppose the market price is p*. In this case, consumer surplus is outlined by the area

The diagram below shows a set of budget lines facing a household. FIGURE 6- 7 -Refer to Figure 6- 7. The movement of the budget line from ab to ef could be caused by

Suppose there are only two goods, A and B, and that consumer income is constant. If the price of good A falls and the consumption of good B rises, we can conclude that

If consumption of a good generates a marginal utility of zero, then consumption of an additional unit would mean that total utility would

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. If the price of a 9- hole round of golf is $9, then Andrew will play times per month.

$\text { Dave's Consumer Surplus on DVD Rentals per Week }$ $\begin{array}{|c|c|c|}\hline \begin{array}{c}\text { Number of DVDs } \\\text { rented per week }\end{array} & \begin{array}{c}\text { Amount } D \text { ave is willing to } \\\text { pay to rent this DVD (\$) }\end{array} & \begin{array}{c}\text { Dave's consumer surplus } \\\text { on each DVD rental if price } \\\text { is } \$ 5 \text { each }\end{array} \\\hline \text { 1st } & 10.00 & \\\hline \text { 2nd } & 8.00 & \\\hline \text { 3rd } & 6.50 & \\\hline 4 \text { th } & 5.50 & \\\hline 5 \text { th } & 5.00 & \\\hline \text { 6th } & 4.50 & \\\hline 7 \text { th } & 4.25 & \\\hline\end{array}$ $\text { TABLE 6-2 }$ -Refer to Table 6- 2. How many DVDs will Dave rent per week such that the consumer surplus on the last unit is zero?

When a consumer's marginal rate of substitution between X and Y is equal to the ratio of prices for X and Y, and when the consumer is spending all available income, then

For a product with an income elasticity greater than one, a price increase will cause the consumer's real income to

A consumer maximizes his or her utility when expenditures are allocated such that

The total value that Doug places on his consumption of computer games equals

If consumption of a product delivers a positive marginal utility, then consumption of an additional unit would mean

The substitution effect is the change in quantity demanded that occurs

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 C is

$\text { Dave's Consumer Surplus on DVD Rentals per Week }$ $\begin{array}{|c|c|c|}\hline \begin{array}{c}\text { Number of DVDs } \\\text { rented per week }\end{array} & \begin{array}{c}\text { Amount } D \text { ave is willing to } \\\text { pay to rent this DVD (\$) }\end{array} & \begin{array}{c}\text { Dave's consumer surplus } \\\text { on each DVD rental if price } \\\text { is } \$ 5 \text { each }\end{array} \\\hline \text { 1st } & 10.00 & \\\hline \text { 2nd } & 8.00 & \\\hline \text { 3rd } & 6.50 & \\\hline 4 \text { th } & 5.50 & \\\hline 5 \text { th } & 5.00 & \\\hline \text { 6th } & 4.50 & \\\hline 7 \text { th } & 4.25 & \\\hline\end{array}$ $\text { TABLE 6-2 }$ -Refer to Table 6- 2. Assuming Dave maximizes his utility, his consumer surplus (in dollars) on each DVD rental in order from 1 through 7 is as follows: