Exam 21: The Theory of Consumer Choice

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.

Figure 21-4 -Refer to Figure 21-4. Suppose the price of pretzels is $1, the price of lemonade is $2, the value of A is 120, and the value of B is 60. How much income does the consumer have?

Explain the difference between inferior and normal goods. As a developing economy experiences increases in income (measured by GDP), what would you predict to happen to demand for inferior goods?

A family on a trip budgets $984 for meals and gasoline. If the price of a meal for the family is $60 and if gasoline costs $3.40 per gallon, then how many gallons of gasoline can the family buy if they buy 13 meals?

Figure 21-18 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. ​ -Refer to Figure 21-18. If point A is Kevin's optimum, then at that optimum, what is his opportunity cost of a shirt in terms of sweaters?

Kendra, 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. Kendra 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?

A consumer's indifference curves are right angles when, for the consumer, the goods in question are __________.

Which of the following statements is not correct?

Figure 21-6 -Refer to Figure 21-6. If the consumer has $600 in income, what is the price of good X?

When Celia has an income of $1,200, she consumes 30 units of good A and 55 units of good B. After Celia's income increases to $1,800, she consumes 15 units of good A and 70 units of good B. Which of the following statements is correct?

Figure 21-18 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. ​ -Refer to Figure 21-18. Suppose point A was Kevin's optimum last week, and point B is his optimum this week. What happened between last week and this week?

When Joshua's income increases, he purchases more prime-rib dinners than he did before his income increased. For Joshua, prime-rib dinners are

For a typical consumer, most indifference curves are bowed inward.

Scenario 21-2 Aliyah has recently graduated from college with a degree in journalism and economics. She has decided to pursue a career as a freelance journalist writing for business newspapers and magazines. Aliyah is typically awake for 119 hours each week (she sleeps an average of seven hours each day). For each hour Aliyah spends writing, she can earn $75. Aliyah is such a good writer that she can get paid for as many hours of writing as she chooses to work. -Refer to Scenario 21-2. If Aliyah decides to spend 60 hours a week playing volleyball on the beach and the rest of her time writing, how much income will she have available to spend on consumption goods?

Figure 21-18 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. ​ -Refer to Figure 21-18. Suppose Kevin is optimally purchasing 21 shirts and 28 sweaters, and he is spending $1,680 on sweaters. What is the price of a shirt?

Ryan experiences an increase in her wages. The hours of labor that she supplies to the market would increase if

The rate at which a consumer is willing to exchange one good for another while maintaining a constant level of satisfaction is called the

What does the slope of a consumer's indifference curve represent?

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, coffee is a normal good, but donuts are an inferior good.

The theory of consumer choice provides the foundation for understanding the