Exam 21: The Theory of Consumer Choice

Assume that a college student purchases only Ramen noodles and textbooks.If Ramen noodles are an inferior good and textbooks are a normal good,then the income effect associated with an increase in the price of a textbook will result in

The substitution effect of a price change is the change in consumption that results from the movement to a new indifference curve.

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. -Refer to Scenario 21-1.If Frank uses all of his income to buy hats during a certain month,then how many hats does he buy?

An inferior good is one in which

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. -Refer to Figure 21-1.About what percentage of his income is Jack spending on apples when he is at his optimum?

If an indifference curve is bowed out away from the origin,the marginal rate of substitution is

The rate at which a consumer is willing to trade off one good for another is called the __________.

Economic studies of lottery winners and people who have inherited large amounts of money show that

An indifference curve illustrates the

A family on a trip budgets $800 for meals and gasoline.If the price of a meal for the family is $50,how many meals can the family buy if they do not buy any gasoline?

The following diagram shows a budget constraint for a particular consumer. If the price of X is $10,what is the price of Y?

When Phil's income increases,he purchases fewer spaghetti dinners than he did before his income increased.For Phil,spaghetti dinners are a(n)

Figure 21-17 -Refer to Figure 21-17.Bundle B represents a point where

Figure 21-10 -Refer to Figure 21-10.Which of the following statements is correct?

As long as a consumer remains on the same indifference curve,

If goods A and B are perfect substitutes,then the marginal rate of substitution of good A for good B is constant.

Suppose the only two goods that Brett consumes are wine and cheese.When wine sells for $10 a bottle and cheese sell for $10 a pound,he buys 6 bottles of wine and 4 pounds of cheese - spending his entire income of $100.One day the price of wine falls to $5 a bottle,and the price of cheese increases to $20 a pound,while his income does not change.If you illustrate wine on the vertical axis and cheese on the horizontal axis,then

Figure 21-6 -Refer to Figure 21-6.Suppose the price of popcorn is $2,the price of Mt.Dew is $4,the value of A is 30,and the value of B is 15.How much income does the consumer have?

Figure 21-5 -Refer to Figure 21-5.Assume that a consumer faces the budget constraint shown in graph (a)in January and the budget constraint shown in graph (b)in February.If the consumer's income has remained constant,what has happened to prices between January and February?

Which of the following is a property of typical indifference curves?