Econ. Ch. 6: Consumer Choices

differing levels of family income, geographical location of households, & household pref.

All cause variation in American household expenditures

How does the U.S labor... gather information w/regard to the typical consumption choices of Americans

Consumer expenditures Survey

____decribes a situation where a _______ causes a reduction in the buying power of income even though actual income has not changed

Income effect//higher price

The most common pattern for marginal utility is

diminishing marginal utility

Substitution & income effect of a changes in price of a good may be used to explain the

direct relationship btw income & demand

Inferior good is a product

for which the demand decrease as income increase

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

Key assumptions that accompanies the use of numbers for measuring utility is

individuals choose based on their preference

Saving money is an ______ b/c it involves less consumption in the present but the ability to consume more in the future

intemporal choice

The ______ budget constraint shows the tradeoff btw present & future consumption

intemporal choice

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

marginal utility per dollar is the same for both goods

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

market demand to shift left

the function of utils

measurement of utility

The typical pattern revealed in a budget constrain model shows that as the quantity consumed rises

total utility rises; marginal utility falls

ability of a good/service to satisfy wants

utility

the marginal utility of two goods changes

w/the quantities consumed

Marginal utility can be:

positive, negative, or zero

as a general rule utility-maximizing choices between consumption goods occur where the

price ratio & marginal utility ratio of two goods is equal

Marginal Utility

refers to the additional utility provided by one additional unit of consumption

Econ,. determine total utility by:

Multiplying the marginal utility of last unit consumed by # of units consumed

Which occurs simultaneously with the income effect?

substitution effect

What portion of annual consumptions is typically spent by American households on shelter?

1/2

Diminishing Marginal Utility

describes the common pattern whereby each marginal unit of a consumed good provided less of an addition to utility than the previous unit

Substitution effect

rises when a price changes because consumers have a incentive to consume less of the good with a relatively higher price & more of the good with a relatively lower price