microecon - chapter 8 (Utility & demand)
the endowment effect
Gerald is willing to buy a grand piano for $47,000, but he is not willing to give up the grand piano he currently owns for $47,000. Gerald's behaviour is an example of ______.
the price of water is low and the price of a diamond is high, but water is essential to life while diamonds are not
The paradox of value asks why ______.
10.6 percent divided by 4.3 percent, which is 2.5.
The price of bread rose 10.6 percent and the price of fresh milk rose 4.3 percent. So the change in the relative price of bread in terms of fresh milk is
take the action
The rule to follow is if the marginal gain from an action exceeds the marginal loss, ___________.
bounded rationality, bounded will-power, and bounded self-interest
The three limitations on human rationality that behavioural economics emphasizes are ______.
increases
The total utility is the total benefit that a person gets from the consumption of a good or service. Total utility ________ as the quantity consumed increases.
4
The total utility obtained from three packs of potato chips is 36 units and the total utility obtained from two packs is 32 units. The marginal utility from the third pack is _____ unit(s).
decreases; decreases
To return to consumer equilibrium, Ben ______ the number of video games he plays. As Ben returns to consumer equilibrium, his marginal utility per dollar for movies ______ .
consumption
Utility is the benefit or satisfaction that a person gets from the ________ of a good or service.
28
When Gabrielle buys 3 manicures, her total utility is 122 units, and when Gabrielle buys 4 manicures, her total utility is 150 units. what is the marginal utility of the 4th manicure?
inward
When Wendy'sWendy's income decreases she can afford fewer sandwiches and fewer bus tickets. Wendy's budget line shifts _______
Bounded rationality
________ is rationality that is limited by the computing power of the human brain.
Bounded will-power
________ is the less than perfect will-power that prevents us from making a decision that we know, at the time of implementing the decision, we will later regret.
Bounded self-interest
________ is the limited self-interest that results in sometimes suppressing our own interests to help others.
Diminishing marginal utility
_________ is the general tendency for the marginal utility to decrease as the quantity of a good consumed increases.
Bounded will-power
A fan setting a personal eating record knows that overeating is a decision he will later regret., thus it demonstrates______
does not change
An increase in income shifts the budget line outward. The slope of the budget line _______.
an explanation of why we do not always make rational economic decisions
Behavioural economics and neuroeconomics seek to achieve ______.
compute and implement rational decisions; markets
Behavioural economics studies the ways in which limits on the human brain's ability to _____ influences economic behaviourlong dash—both the decisions that people make and the consequence of those decisions for the way _____ work.
increases; increases
Ben consumes only movies and video games and he is in consumer equilibrium. For Ben, movies and video games are substitutes. The price of a movie falls which _____ the marginal utility per dollar from movies. To return to consumer equilibrium, Ben ______ the number of movies he sees.
maximized.
But when enough dollars have been moved from B to A to make the two marginal utilities per dollar equal, total utility cannot be increased further. Utility is ________
8 songs and 1 cookie or 4 songs and 3 cookies
JQ I got wrong: Jake has a budget of $10 per week to spend on song downloads and cookies. 1. If the price of a song is $1 and the price of a cookie is $2, what are the quantities of songs and cookies that *exhaust* Jake's budget?
forgoing utility maximization to set their record
Setting "personal records" results in some fans ______
more; fewer
So if the marginal utility per dollar from hot chocolate exceeds the marginal utility per dollar from video games, buy ______ hot chocolate and play _______ video games.
both have arbitrary units of measurement
Utility and temperature are similar because ______.
demand curve; shifts leftward
When the price of a movie falls, there is an increase in the quantity of movies demanded and a movement down along the ______ for movies. When the price of a movie falls, Ben decreases his demand for video games. The demand curve for video games _______.
Utility *You use the concept of utility to decide which of all the alternative combinations of goods and services that you can afford, you will buy.
______ is the benefit or satisfaction that a person gets from the consumption of goods and services.
Marginal utility
______ is the change in total utility that results from a one-unit increase in the quantity of a good consumed.
Total utility
_______ is the total benefit that a person gets from the consumption of all the different goods and services.
Marginal utility per dollar
_________ is the marginal utility from a good that results from spending one more dollar on it.
budget and prices
A *budget line* is a line that describes limits to consumption possibilities and that depends on a consumer's _______& ________ of goods and services.
budget line
A change in income shifts the _______ but leaves its slope unchanged.
slope
A change in price changes the ______ of the budget line.
complements
A complement is a good that is used in conjunction with another good. When the cross elasticity of demand is negative, the two goods are _________.
total utility
A consumer equilibrium is a situation in which a consumer has allocated all of her income in a way that maximizes her _______.
preferences e.g Lisa buys 2 kilograms of chicken and 1 bag of rice from the grocery store, implies Lisa choice to buy these goods from the grocery store over anything else.
A consumption choice that is a description of one's likes and dislikes are ________.
income or prices change
Consumption possibilities change when _________ or ________ change.
true
T/F: We cannot determine which activity one enjoys more by comparing the total utilities from two activities.
T
T/F; When the last dollar spent on each good gives the same marginal utility, then total utility cannot be increased by changing the consumption combination.
total utility; marginal utility *Because we consume so much water, it has a large total utility. And because marginal utility diminishes as we consume more of a good, water has a small marginal utility. Because we consume so few diamonds, diamonds have a small total utility. And the marginal utility of diamonds is large.
The paradox of value is resolved by distinguishing between ______ and ______.
decreases; decreases
If the Tribute Patchwork bas is copied and thousands are sold illegally, the demand for the real Louis Vuitton Tribute Patchwork bag _______. And because the copied bag is a substitute for the real bag, demand for the real bag becomes more elastic. When the demand for the real bag becomes more elastic, the demand curve becomes flatter. Consumer surplus is the excess of the benefit received from a good over the amount paid for it. Supply is perfectly inelastic at a quantity of 24 real bags. The demand curve shifts leftward, so the price falls, and the consumer surplus _________.
A and less on B
If the marginal utility per dollar from good A exceeds that from good B, total utility can be increased by spending more on ___________.
total utility
In consumer equilibrium, a consumer maximizes his or her ______.
change
Marginal utility is the ________ in total utility that results from a one-unit increase in the quantity of a good consumed.
dividing the marginal utility from the good by its price.
Marginal utility per dollar is calculated by _________
exhaust
More consumption brings more utility, so only those choices that _______ income can maximize utility.
the activity of the human brain; an economic
Neuroeconomics is the study of _____ when a person makes _____ decision.
The accompanying table shows that Max's marginal utility from his 6th hour of windsurfing is 16 units and his marginal utility from his 6th hour of snorkelling is 10 units. So Max enjoys his 6th hour of windsurfing more than his 6th hour of snorkelling.
Q I got wrong:
inside; outside
Roger can afford all points on his budget line and _________ his budget line. Roger cannot afford points _______ his budget line.
we also give utility for gaining the record
Setting personal records for eating can be reconciled with marginal utility theory if _______.
F; relative cost of gum increases but r.c of mints decreases!
T/F; When the price of a pack of gumpack of gum rises, the relative price of a box of mintsbox of mints increases.
bounded willpower and bounded self-interest Bounded willpower is the less-than-perfect willpower that prevents us from making a decision that we know, at the time of implementing the decision, we will later regret. Utility-maximization is most likely to occur if the city buys the cheaper California-sourced berries. But weak willpower could lead to the purchase of the more expensive Ontario strawberries. Bounded self-interest is the limited self-interest that results in sometimes suppressing our own interests to help others. Toronto may decide to help the Ontario strawberry growers over the prospect of utility-maximization.
The conflict that might exist between utility-maximization and the decision to allocate the city's budget on the basis of 'buy local' is ______.
Neuroeconomics
The discipline uses the observational tools and ideas of neuroscience to better understand economic decisions.
decreases
The fact that fans eat less at subsequent games indicates that the marginal utility from ballpark food ______ as the quantity consumed increases.
inelastic
Max's elasticity of demand for rented windsurfing equipment is 0.75. When price elasticity of demand is less than 1, demand is _______.