ECON 2302 - Chapter 6

Economic theory offers ____________________ about the full range of possible events and responses, which can prevent __________________ about how households will respond to changes in prices or incomes.

a systemic way of thinking; misguided conclusions

Even with wage increases, the supply curve of labor is most often inelastic for which of the following?

full-time workers

The term _________________ refers to the additional utility provided by one additional unit of consumption.

marginal utility

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?

the marginal utility per dollar is the same for both goods

Josh's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Josh knows that 2 pizzas and 4 burgers will give him a utility of 8. What is Josh's utility-maximizing point?

2 pizzas, 4 burgers

In the U.S., the amount in savings contributed to IRAs rose from $239 billion in 1992 to $3,667 billion by 2005, while overall savings actually dropped from low to lower. Evidence suggests that, in the economy as a whole, increased savings in these retirement accounts:

are being offset by negative savings or less savings in other kinds of accounts

Which of the following is most likely to cause variation in American household spending patterns? -differing levels of family income -geographical location of households -each household's personal preferences -each of the above will cause a variation

each of the above will cause a variation

The term _____________ describes a situation where a ________________ causes a reduction in the buying power of income, even though actual income has not changed.

income effect; higher price

When economists attempt to predict the spending patterns of U.S. households, they will typically view the _____________________ as a primary determining factor that influences the individual consumption choices that each will make.

income level of each household

The _________________ budget constraint shows the tradeoff between present and future consumption.

intertemporal choice

A decrease in consumer preference for a product, other things being equal, will cause:

market demand to shift to the left

Which of the following occurs simultaneously with an income effect? -backward-bending supply curve -Giffen good effect -preferences effect -substitution effect

substitution effect

The ________________ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price.

substitution effects