Exam 7: Aggregate Demand and Aggregate Supply

-(Exhibit: Consumer Equilibrium 2)Assume the consumer is currently operating at point G.Given the budget constraint shown, the consumer would be able to realize more total utility by choosing point ________ , all other things held equal.

-If the combination of two goods is a point of tangency between the budget line and an indifference curve, then:

The theory of consumer choice, generally, examines the insights involved in constrained choices.

Consumer Equilbrium 1 Units of GoodX Marginal Utility of GoodX Units of Good Y Marginal Utility of Good Y 1 20 1 12 2 16 2 10 3 12 3 8 4 8 4 6 5 4 5 4 6 0 6 2 -(Exhibit: Consumer Equilibrium 1)Assume that the price of both goods X and Y is $1 per unit, and you have $7 of income to spend on both goods.To maximize utility, you would consume ________ units of X and _______ units of Y.

If, because of a price change, both the income and substitution effects are strong for a normal good, this segment of the demand curve must be:

The substitution effect indicates that the implicit change in income contributes to the inverse relationship between price and quantity demanded.

Assume that the total utilities corresponding to the first five units of a product consumed are 10, 15, 19, 22, and 24, respectively.The marginal utility of the third unit is:

The change in a consumer's consumption of a good in response to an income-compensated price change is called the:

If the price of a good falls and the consumer decides to buy more of the good solely because it is relatively less expensive, this describes the:

In using the concept of marginal utility as an argument for a downward-sloping demand curve, economists:

Market demand is found by:

An imaginary adjustment of a consumer's income at the same instant a price changes, so the consumer has just enough to buy the same goods and services at the new price is:

A budget line is based on given:

In prisoner of war camps, as described in the Case in Point, economists would expect to find:

If the marginal utility from consuming a good is less than zero, total utility must be falling.

Jill Smith, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream.She had just achieved the utility-maximizing solution in her consumption of the two goods when the price of peanut butter rose.As she adjusts to this event:

A demand curve is generated from indifference curves by changing:

Economists assume that consumers behave in a manner consistent with the _______ of utility.

A consumer achieves the same level of utility along a given indifference curve.

When the price of an inferior good falls: