Exam 21: The Theory of Consumer Choice

Just as the theory of the competitive firm provides a more complete understanding of supply,the theory of consumer choice provides a more complete understanding of

For Molly,the substitution effect of a wage increase is stronger than the income effect.In response to a wage increase,will Sally work more hours or will she work fewer hours?

If consumers purchase more of a good when their income rises,the good is a normal good.

A decrease in the price of DVD players leads consumers to buy more DVD players.From this information we can conclude that DVD players

A consumer chooses an optimal consumption point where the

If income increases and prices are unchanged,the consumer's budget constraint

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst.The price of a pint of beer is $5,and the price of a bratwurst is $4.Which of the following combinations of beers and bratwursts represents a point that would lie to the interior of the consumer's budget constraint?

The change in consumption that results when a price change moves the consumer along a given indifference curve to a point illustrating the new marginal rate of substitution is called the

When two goods are perfect substitutes,the

Bundle L contains 10 units of good X and 20 units of good Y.Bundle M contains 8 units of good X and 21 units of good Y.The consumer is indifferent between bundle L and bundle M.Assume that the consumer's preferences satisfy the four properties of indifference curves.Which of the following correctly expresses the marginal rate of substitution of good X for good Y between these two points?

The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to

If an indifference curve is bowed in toward the origin,the marginal rate of substitution is

The theory of consumer choice most closely examines which of the following Ten Principles of Economics?

Bill consumes two goods,iced tea and spaghetti.The price of iced tea is $4 per bottle,and the price of spaghetti is $6 per serving.His income is $1,000 per month.He spends all his income each month.He purchases 100 bottles of iced tea.How many servings of spaghetti can he purchase?

If the consumer's income and all prices simultaneously double,then the optimum consumption bundle will

Jordan is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires.When the income effect dominates the substitution effect,an increase in the interest rate on savings will cause him to

A consumer's optimal choice occurs when the

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.Who can afford to purchase 8 gallons of ice cream and 5 paperback novels?

Figure 21-3 In each case,the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure could reflect a simultaneous decrease in the price of good X and increase in the price of good Y? (i)Graph a (ii)Graph b (iii)Graph c (iv)Graph d

Figure 21-21 -Refer to Figure 21-21.If the consumer were initially at point A in the figure,a movement from point B to point C as a result of a decrease in the price of potato chips represents the