Exam 6: Demand and Welfare

If leisure is drawn on the horizontal axis and labor is drawn on the vertical axis,then a person who attaches more importance to leisure than to labor will have indifference curves that:

Suppose Eddie's demand curve for text messages is T = 150 - 500P_t,where T stands for the number of text messages and P_t represents the price of text messages.What is Eddie's consumer surplus if P_t = $0.10 per message?

Suppose the base year for a Lespeyres index is 2001.The value of the index is 1.3 in 2004 and 1.6 in 2006.By how much did the cost of the bundle increase between 2004 and 2006?

Refer to Figure 6.5.By how many hours does leisure change as a result of the income effect of the wage change?

A demand curve that shows the relationship between the price of a good and the amount of the good consumed holding the consumer's well-being fixed and allowing their to income vary is called:

For a normal good,the income and substitution effects work in the ______ direction.Therefore,a change in price produces a ______ change in uncompensated demand than in compensated demand.

Refer to Figure 6.1.Assume that L1 represents the budget line before a price change.Point C represents the:

A consumer's ______ determines the location of their uncompensated demand curve,while the level of their ______ determines the location of their compensated demand curve.

If a good is _______,the income effect is negative for a price increase and positive for a price decrease.

Refer to Figure 6.4.If the price of computers is $1,500,then consumer surplus is equal to:

The demand curve for a normal good will:

Define consumer surplus.Using a graph,explain the change in consumer surplus that would result from a decrease in the price of a gasoline.

Figure 6.2 illustrates a change in the price of soup.From the graph,we can conclude that:

Using a graph,explain both the substitution effect and income effect that result from an increase in the price of a normal good.

Refer to Figure 6.1.Assume that L1 represents the budget line before a price change.The substitution effect is shown by the movement:

Which of the following statements is true?

Suppose Eddie's demand curve for text messages is T = 150 - 500P_t,where T stands for the number of text messages and P_t represents the price of text messages.What is Eddie's consumer surplus if P_t = $0.05 per message?

Because individuals initially own more time than they consume and sell the difference to their employers:

Which of the following is correct?

Suppose that high-definition television sets (HDTVs)are normal goods.Would the compensated demand curve for HDTVs be flatter or steeper than the uncompensated demand curve? Explain your answer using a carefully-labeled graph.