Exam 21: The Theory of Consumer Choice

When Matt has an income of $2,000,he consumes 30 units of good A and 50 units of good B.After Matt's income increases to $3,000,he consumes 25 units of good A and 95 units of good B.Which of the following statements is correct?

Katie wins $3 million in her state's lottery.If Katie drastically reduces the number of hours she works after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

Teresa faces prices of $6.00 for a unit of good X and $1.50 for a unit of good Y.At her optimum,Teresa is willing to give up 1 unit of good X for __________ units of good Y.

The income effect of a price change is depicted by

When two goods are perfect complements,the indifference curve is

What are the two effects of a change in a price that a consumer experiences?

The theory of consumer choice describes the

The consumer's optimum is where

Consider a consumer who purchases two goods,X and Y.If the price of good Y falls,then the substitution effect by itself will

Karen,Tara,and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days.Ice cream costs $5 per gallon,and paperback novels cost $8 each.Karen has a budget of $80,Tara has a budget of $60,and Chelsea has a budget of $40 to spend on ice cream and paperback novels.Which of the following statements is correct?

A consumer's preferences for right shoes and left shoes can be represented by indifference curves that are

A consumer consumes two normal goods,sandwiches and milk.When the price of milk is $0.50 per glass,the consumer purchases 40 glasses.When the price rises to $0.65 per glass,the consumer purchases 30 glasses.We can use the information provided by the consumer's optimum choices to derive the

An increase in a consumer's income

The slope of an indifference curve is

The substitution effect of a price change is depicted by a

Suppose a consumer spends her income on two goods: music CDs and DVDs.The consumer has $200 to allocate to these two goods,the price of a CD is $10,and the price of a DVD is $20.What is the maximum number of CDs the consumer can purchase?

Figure 21-12 -Refer to Figure 21-12.If the consumer moves from bundle W to bundle Z,the

Suppose a consumer has preferences over two goods,X and Y,which are perfect substitutes.In particular,two units of X is equivalent to one unit of Y.If the price of X is $1,the price of Y is $3,and the consumer has $30 of income to allocate to these two goods,how much of each good should the consumer purchase to maximize satisfaction?

Graphically demonstrate the conditions associated with a consumer optimum.Carefully label all curves and axes.

Figure 21-7 -Refer to Figure 21-7.Suppose a consumer has $200 in income,the price of a book is $5,and the price of a DVD is $10.What is the value of A?