Exam 21: The Theory of Consumer Choice

Figure 21-23 -Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The income effect can be illustrated as the movement from

When a consumer experiences a price decrease for an inferior good, if the income effect is

Figure 21-29 The figure below illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-29. A change in Nathaniel's optimum from point A to point B results from

When the price of a normal good decreases,

A consumer consumes two normal goods, coffee and chocolate. The price of coffee rises. The income effect, by itself, suggests that the consumer will consume

Figure 21-26 -Refer to Figure 21-26. Rhonda experiences an increase in her hourly wage. Her optimal choice point moves from A to B. For Rhonda,

If income increases and prices are unchanged, the consumer's budget constraint

A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect.

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. About what percentage of his income is Steve spending on apples when he is at his optimum?

Figure 21-8 -Refer to Figure 21-8. You have $600 to spend on good X and good Y. If good X costs $100 and good Y costs $100, your budget constraint is

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If point B is Kevin's optimum, then at that optimum, what is his opportunity cost of a sweater in terms of shirts?

A consumer spends all of her income on goods x and y. At her optimum,

Scenario 21-4 Frank spends all of his income of $240 per month on shirts and hats. The price of a shirt is $40 and the price of a hat is $30. -Refer to Scenario 21-4. If Frank buys 3 shirts during a certain month, then how many hats does he buy during that month?

When we draw Katie's indifference curves to represent her preferences for books and movies, we find that her indifference curves are upward-sloping. What does this tell us about Katie's preferences?

Calvin is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the substitution effect dominates the income effect, an increase in the interest rate on savings will cause him to

Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y. -Refer to Figure 21-25. Suppose the price of good X is $15, the price of good Y is $10, and the consumer's income is $450. Then the consumer's optimal choice is to buy

Figure 21-2 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?

Given a consumer's indifference map, the demand curve for a good can

When we derive the demand curve for a good, we should remember that the

Figure 21-20 The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies: -Refer to Figure 21-20. Assume that the consumer has an income of $80. If the price of chocolate chips is $4 and the price of marshmallows is $4, the optimizing consumer would choose to purchase