Microeconomics Ch. 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 systematic way of thinking; Misguided conclusions

In terms of microeconomic analysis, what is the function of "utils"?

A Measurement of Utility

Marginal Utility can:

Be positive, negative, or zero.

The most common pattern for marginal utility is ____________________.

Diminishing Marginal Utility

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 key assumption that accompanies the use of numbers for measuring utility is that:

Individuals choose based on their preferences.

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 Effect

Approximately what portion of annual consumption is typically spent by American households on shelter?

One-third

As a general rule, utility-maximizing choices between consumption goods occur where the:

Price ratio and marginal utilities ratio of two goods is equal.

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

Total utility rises, but marginal utility falls

The step-by-step process of finding the choice with highest total utility involves a comparison of the:

Marginal utility gained and lost from different choices along the budget constraint.

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

Market demand to shift to the left.

When Marietta chooses to only purchase a combination of goods that lie within her budget line, she is:

Maximizing Utility

Jay and Jen are married with two children. They are preparing a household budget for the coming year. Based on statistical information for American households, approximately what portion of this family's annual consumption will most likely be budgeted for food and vehicle expenses?

One-third

The marginal utility of two goods changes ______________.

With the quantities consumed.

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

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

8

How does the U.S. Bureau of Labor Statistics gather information with regard to the typical consumption choices of Americans?

Consumer Expenditure Survey

The term ___________________ is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit.

Diminishing Marginal Error

Substitution and income effects of a change in price of a good may be used to explain the:

Direct relationship between income and demand.

An inferior good is a product:

For which demand decreases as income increases.

Even with wage increases, the supply curve of labor is most often inelastic for:

Full-time workers

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

Saving money is a(n) ____________________, because it involves less consumption in the present, but the ability to consume more in the future.

Intertemporal Choice

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

Intertemporal Choice

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

Marginal Utility

Economists are able to determine total utility by:

Summing up the marginal utilities of each unit consumed.

The theoretical model of the intertemporal budget constraint for the U.S. economy as a whole suggests that the most common pattern seems to be that:

The quantity of savings doesn't adjust much to changes in the rate of return.

In microeconomic terms, the ability of a good or a service to satisfy wants is called:

Utility