Exam 12: Consumer Choices and Constraints

-Consider the change in the price of a book depicted in the above figure. The original budget line is BC. The new budget line is BD. As a result of this price change, the income effect can be represented by a movement from

-Consider the budget line in the above figure. If the consumer's income is $240, then the price of a book is

The magnitude of the slope of an indifference curve

-In the above figure, if the budget line shifts from RT to RS, the substitution effect is illustrated by the move from

If Rachel is at her best affordable point, then _______.

Movies are $10 a ticket, and DVD rentals are $5 a DVD. With movies on the vertical axis, the magnitude of the slope of the budget line is

In an indifference curve/budget line diagram, a consumer will select the combination of goods that is on the budget line and for which the

-The figure above illustrates Sally's budget line and her preferences. At point(s) _______ , the marginal rate of substitution is equal to the relative price.

-The figure above gives your budget line for magazines and CDs per month. Given that your income equals $60 per month, what is your real income in terms of magazines?

-The indifference curves in the figure above (I1, I2 and I3) reflect Peter's consumption preferences. Which of the following combinations of goods does Peter prefer the most?