Exam 9: Possibilities, Preferences, and Choices

Leah consumes at a point on her budget line where her marginal rate of substitution is less than the magnitude of the slope of her budget line. As Leah moves along her budget line toward her best affordable point, she will move

What is a distinguishing characteristic of goods that are perfect complements?

Use the information below to answer the following questions. Fact 9.3.3 Jim has made his best affordable choice of muffins and coffee. He spends all of his income on 10 muffins at $1 each and 20 cups of coffee at $2 each. Muffins and coffee are ordinary goods. Now the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup. -Refer to Fact 9.3.3. When the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup, Jim

Which one of the following is always true of the income effect?

Karen consumes chocolate and candles. When Karen is at her best affordable point, she is

Use the information below to answer the following questions. Fact 9.3.3 Jim has made his best affordable choice of muffins and coffee. He spends all of his income on 10 muffins at $1 each and 20 cups of coffee at $2 each. Muffins and coffee are ordinary goods. Now the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup. -Refer to Fact 9.3.3. When the price of a muffin and the price of a cup of coffee change,

The marginal rate of substitution

Which one of the following statements is always true of the substitution effect?

The effect of a change in income on buying plans is called the

Use the figure below to answer the following questions. Figure 9.1.1 -Shelly's budget line is shown in Figure 9.1.1. Which points are affordable given her income and current prices?

Larry consumes only beer (B)and chips (C). If beer is measured on the vertical axis, the relative price of chips in terms of beer is all of the following except

Larry consumes only beer (B)and chips (C). His real income in terms of beer is

David has an income of $60 to buy movie tickets and bus tickets. The price of a movie ticket is $12 and the price of a bus ticket is $4. What is the relative price of a bus ticket in terms of movie tickets?

The price of a cup of coffee is $2.00. The price of a cup of tea is $1.20. The relative price of a cup of tea with respect to a cup of coffee is

Which one of the following is always true of the price effect?

A change in income changes ________ of the budget line.

Sarah has an income of $100. She purchases 5 pizzas at $10 each and 10 subs at $5 each. Then the government taxes subs, and the price rises to $10 each. Simultaneously, the government gives Sarah a grant of $50 in income to make up for this change. As a result, Sarah's budget line

Which one of the following statements is false?

Jay has an income of $10 to buy peanuts and popcorn. The price of peanuts is $1 a bag and the price of popcorn is $2 a bag. He chooses to consume 5 bags of peanuts and 2 bags of popcorn. What can we say about this consumption choice?

Let Y = $100, QX = quantity of good X, and QW = quantity of good W, PX = $4 and PW = $5. The budget equation is