ECON 111

To maximize utility a consumer should allocate money income so that the

marginal utility obtained from the last dollar spent on each product is the same

The demand curve slopes downward to the right because

of the law of demand

The demand curve shows the relationship between

price and quantity demanded

the higher the price of a good, the smaller is the quantity demanded

the degree of substitutability between the two goods

The law of demand states that, other things remaining the same,

the higher the price of a good, the smaller is the quantity demanded

The magnitude of the slope of an indifference curve is

the marginal rate of substitution

Graphically, the horizontal sum of all individual demand curves is known as:

the market demand curve

most important variable in determining the quantity demanded

the price of the product itself

Good X is measured on the horizontal axis and good Y is measured on the vertical axis. The marginal rate of substitution is

the relative price of good Y in terms of good X

In consumer equilibrium

total utility is maximized given the consumerʹs income and the prices of goods

The fact that your fourth slice of pizza does not generate as much satisfaction as your third

diminishing marginal utility

The income and substitution effects account for:

downward sloping demand curve

The diamond-water paradox arises because

essential goods may be cheap because plentiful while nonessential goods may be expensive because scarce

An increase in the price of ground beef

increases the demand for chicken, a substitute for ground beef, decreases the quantity demanded of ground beef

An increase in income

increases the demand for turnips if a turnip is a normal good

Which one of the following statements about the budget line is false? The budget line

is based on fixed quantities

If total utility is increasing, marginal utility

is positive, but may be either increasing or decreasing

Suppose that MUx/Px exceeds MUy/Py. To maximize utility the consumer who is spending all her money income should buy

. more of X and less of Y

A price elasticity of demand of 2 means that a 10 percent increase in price will result in a

20 percent decrease in quantity demanded

inelastic demand

A change in price has relatively little effect on quantity demanded

If John consumes only two goods, A and B, and he is maximizing his utility subject to his budget constraint

MUA/MUB equals the ratio of the price of A to the price of B

A consumer is maximizing her utility with a particular money income when:

MUa/Pa = MUb/Pb = MUc/Pc = ... = MUn/Pn.

Diminishing marginal utility means that

Ralph will enjoy his second hamburger less than the first one

At the best affordable point, what is the relationship between the indifference curve and the budget line

The slope of the indifference curve equals the slope of the budget line

Which one of the following is not true in consumer equilibrium?

The total utilities of all goods are equal

An indifference curve is

a line that shows combinations of goods among which a consumer is indifferent

The price of one good divided by the price of another good is

a relative price

A preference map is

a series of indifference curves

A turnip is an inferior good if

an increase in income decreases the demand for turnips

Which one of the following events shifts the demand curve for grape jelly to the right?

an increase in income if grape jelly is a normal good