Deck 1: Consumer Theory and Utility

Full screen (f)
exit full mode
Question
Which of the following is called gossans first law

A)law of substitution
B)law of equi marginal utility
C)law of diminishing marginal utility
D)none of the above
Use Space or
up arrow
down arrow
to flip the card.
Question
When individuals income falls (everything remain the same) his demand for an inferior good

A)rises
B)falls
C)remains the same
D)we cannot say without additional information
Question
If negative income effect is greater than positive substitution effect : the product will be

A)a normal good
B)an inferior good
C)a giffen good
D)a complementary good
Question
Which of the following statement is FALSE with regard to marginal utility

A)marginal utility is the utility derived from last unit
B)as consumption increases marginal utility goes on diminishing
C)at saturation point marginal utility is zero
D)marginal utility increases at a diminishing range
Question
According to Marshall consumer surplus is:

A)total utility - marginal utility
B)total utility + marginal utility
C)total utility derived - price
D)price - marginal utility
Question
If both the products X & Y are normal goods

A)slopes down towards right
B)slopes up towards right
C)slopes up towards left
D)slopes down towards left
Question
Which of the following statement is TRUE with regard to total utility

A)total utility is the utility derived from last unit
B)total utility increases at a diminishing range
C)as consumption increases total utility goes on diminishing
D)at saturation point total utility is negative
Question
If negative income effect is less than positive substitution effect : the product will be

A)a normal good
B)an inferior good
C)a giffen good
D)a complementary good
Question
Which of the following statements is true

A)hicksian substitution effect is greater than slutsky substitution effect
B)slutsky substitution effect is greater than hicksian substitution effect
C)hicksian substitution effect is same and equal to slutsky substitution effect
D)hicksian substitution effect is the reverse of slutsky substitution effect
Question
According to Hicks substitution effect is

A)the movement to a higher indifference curve
B)the movement to a lower indifference curve
C)the movement along an indifference curve
D)the movement to a decreased consumption
Question
Strong ordering means

A)absence of indifference
B)presence of indifference
C)no difference between different combinations
D)none of the above
Question
In the fundamental theorem of consumption and to prove the law of demand, Samualson uses

A)compensating variation in income
B)the cost difference
C)the over compensation effect
D)substituting variation in price
Question
If negative income effect is greater than positive substitution effect : price effect will be

A)zero
B)negative
C)positive
D)positive and greater than one
Question
As per indifference curve analysis consumer equilibrium is attained when

A)slope of indifference curve is constant
B)slopes of both indifference curve and income price line are equal
C)slopes of both indifference curve and income price line are opposite
D)both income price line and indifference curve are parallel.
Question
The slope of a budget line is

A)the satisfaction level of both the commodities
B)the income level of the consumer
C)the price ratio of both the commodities under consideration
D)price level of a country
Question
At the point of tangency the slope of indifference curve is

A)differ from point to point
B)is equal on the other side of the mid point
C)is the same
D)is increasing
Question
The slope of a budget line throughout its length is

A)the satisfaction level of both the commodities
B)the income level of the consumer
C)the price ratio of both the commodities under consideration
D)price level of a country
Question
The income effect for a commodity is

A)is always positive
B)is always negative
C)depends upon price effect
D)determines the nature of the commodity
Question
The substitution effect for a commodity is

A)is always positive
B)depends upon the nature of the commodity
C)depends upon price effect
D)sometimes negative and sometimes positive
Question
Price effect is

A)income effect - substitution effect
B)substitution effect - income effect
C)income effect + substitution effect
D)income effect + substitution effect- negative effects
Question
For a giffen good, when price falls

A)demand increases at a faster rate
B)demand decreases
C)demand remains constant
D)demand curve has a negative slope
Question
Inferior goods are the goods with

A)falling income effect
B)rising income effect
C)negative income effect
D)positive marshallian effects
Question
Indifference curves are

A)always parallel
B)may be parallel
C)may not be parallel
D)both b and c
Question
Revealed preference theory assumes

A)weak ordering
B)strong ordering
C)constant ordering
D)multiple ordering
Unlock Deck
Sign up to unlock the cards in this deck!
Unlock Deck
Unlock Deck
1/24
auto play flashcards
Play
simple tutorial
Full screen (f)
exit full mode
Deck 1: Consumer Theory and Utility
1
Which of the following is called gossans first law

A)law of substitution
B)law of equi marginal utility
C)law of diminishing marginal utility
D)none of the above
law of diminishing marginal utility
2
When individuals income falls (everything remain the same) his demand for an inferior good

A)rises
B)falls
C)remains the same
D)we cannot say without additional information
rises
3
If negative income effect is greater than positive substitution effect : the product will be

A)a normal good
B)an inferior good
C)a giffen good
D)a complementary good
a giffen good
4
Which of the following statement is FALSE with regard to marginal utility

A)marginal utility is the utility derived from last unit
B)as consumption increases marginal utility goes on diminishing
C)at saturation point marginal utility is zero
D)marginal utility increases at a diminishing range
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
5
According to Marshall consumer surplus is:

A)total utility - marginal utility
B)total utility + marginal utility
C)total utility derived - price
D)price - marginal utility
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
6
If both the products X & Y are normal goods

A)slopes down towards right
B)slopes up towards right
C)slopes up towards left
D)slopes down towards left
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
7
Which of the following statement is TRUE with regard to total utility

A)total utility is the utility derived from last unit
B)total utility increases at a diminishing range
C)as consumption increases total utility goes on diminishing
D)at saturation point total utility is negative
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
8
If negative income effect is less than positive substitution effect : the product will be

A)a normal good
B)an inferior good
C)a giffen good
D)a complementary good
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
9
Which of the following statements is true

A)hicksian substitution effect is greater than slutsky substitution effect
B)slutsky substitution effect is greater than hicksian substitution effect
C)hicksian substitution effect is same and equal to slutsky substitution effect
D)hicksian substitution effect is the reverse of slutsky substitution effect
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
10
According to Hicks substitution effect is

A)the movement to a higher indifference curve
B)the movement to a lower indifference curve
C)the movement along an indifference curve
D)the movement to a decreased consumption
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
11
Strong ordering means

A)absence of indifference
B)presence of indifference
C)no difference between different combinations
D)none of the above
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
12
In the fundamental theorem of consumption and to prove the law of demand, Samualson uses

A)compensating variation in income
B)the cost difference
C)the over compensation effect
D)substituting variation in price
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
13
If negative income effect is greater than positive substitution effect : price effect will be

A)zero
B)negative
C)positive
D)positive and greater than one
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
14
As per indifference curve analysis consumer equilibrium is attained when

A)slope of indifference curve is constant
B)slopes of both indifference curve and income price line are equal
C)slopes of both indifference curve and income price line are opposite
D)both income price line and indifference curve are parallel.
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
15
The slope of a budget line is

A)the satisfaction level of both the commodities
B)the income level of the consumer
C)the price ratio of both the commodities under consideration
D)price level of a country
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
16
At the point of tangency the slope of indifference curve is

A)differ from point to point
B)is equal on the other side of the mid point
C)is the same
D)is increasing
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
17
The slope of a budget line throughout its length is

A)the satisfaction level of both the commodities
B)the income level of the consumer
C)the price ratio of both the commodities under consideration
D)price level of a country
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
18
The income effect for a commodity is

A)is always positive
B)is always negative
C)depends upon price effect
D)determines the nature of the commodity
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
19
The substitution effect for a commodity is

A)is always positive
B)depends upon the nature of the commodity
C)depends upon price effect
D)sometimes negative and sometimes positive
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
20
Price effect is

A)income effect - substitution effect
B)substitution effect - income effect
C)income effect + substitution effect
D)income effect + substitution effect- negative effects
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
21
For a giffen good, when price falls

A)demand increases at a faster rate
B)demand decreases
C)demand remains constant
D)demand curve has a negative slope
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
22
Inferior goods are the goods with

A)falling income effect
B)rising income effect
C)negative income effect
D)positive marshallian effects
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
23
Indifference curves are

A)always parallel
B)may be parallel
C)may not be parallel
D)both b and c
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
24
Revealed preference theory assumes

A)weak ordering
B)strong ordering
C)constant ordering
D)multiple ordering
Unlock Deck
Unlock for access to all 24 flashcards in this deck.
Unlock Deck
k this deck
locked card icon
Unlock Deck
Unlock for access to all 24 flashcards in this deck.