Exam 5: Background to Demand: Consumer Choices

A family on a trip budgets R8 000 for restaurant meals and fast food. If the price of a fast food meal for the family is R200, how many such meals can the family buy if they do not eat at restaurants?

Which of the following statements is not true with regard to the standard properties of indifference curves?

Indifference curves tend to be bowed inward because a consumer is willing to trade a greater amount of a good for another if they have an abundance of the good they are trading away.

In the upward-sloping portion of the individual labour supply curve, the substitution effect is __________ the income effect.

Outline the four key properties of indifference curves.

The more difficult it is to substitute one good for another, the more bowed inward indifference curves become.

Nathalie is maximising total utility while consuming food and clothing. Her marginal utility from food and clothing is 50 and 25, respectively. If clothing is priced at R100 per unit, the price of food must

The slope at any point on an indifference curve is known as the

As more hours of Internet access are purchased, everything else remaining unchanged, marginal satisfaction from consuming additional hours will tend to

All of the following are characteristics of an indifference map except

The change in consumption that results when a price change moves the consumer along a given indifference curve is known as the

If the price of a good falls and the good is a normal good, the income effect causes a decrease in the quantity demanded of that good.

Budget constraints exist for consumers because

If an increase in a consumer's income causes the consumer to increase his quantity demanded of a good, then the good is

Why are many purchase decisions irrational?

If a good is a Giffen good, then

Which of the following is the best example of rational behaviour?

Suppose we measure the quantity of good X on the horizontal axis and the quantity of good Y on the vertical axis. If indifference curves are bowed inward, as we move from having an abundance of good X to having an abundance of good Y, the marginal rate of substitution of good Y for good X (the slope of the indifference curve)

If the price of a good falls, the substitution effect always causes an increase in the quantity demanded of that good.

Exhibit A -Refer to Exhibit A. Suppose that the consumer must choose between buying socks and belts. Also, suppose that the consumer's income is R1 000. Suppose that the price of a pair of socks has falls from R50 to R20. The income effect is represented by the movement from point?