ECon chapter 5

he tendency for consumers to purchase more of a good or service as its price falls is called

D. the law of demand

is the additional utility gained from consuming an additional unit of a good

Marginal Utilit

After subsistence levels of food, shelter, and clothing are provided

all other goods and services are "wants".

Economists assume that people

allocate their income between different goods and services to make themselves as happy as possible

The law of demand indicates that as the cost of an activity

falls, more of the activity will occur.

which law states that people do less of what they want to do as the cost of doing it rises.

law of demand

he law of demand states that people do _____ of what they want to do as the cost of doing it rises.

less

If two points lie on the same indifference curve, then we know the consumer

likes both bundles equally well.

An indifference curve traces out all of the consumption bundles that a consumer

likes equally well

The additional utility gained from consuming an additional unit of a good is _____.

marginal utility

The affordable combination of goods that yields the highest total utility for a consumer is known as the

optimal combination of goods

According to _____ spending should be allocated across goods so that the marginal utility per dollar is the same for each good.

rational spending rule

Economists refer to the total satisfaction that people derive from all of their consumption activities as _____.

total utility

The term marginal utility denotes the amount by which ______ changes when consumption changes by _____ unit(s)

total utility, 1

ccording to economists, the satisfaction people get from their consumption activities is called

utility

When the price of a good goes up, part of the reason consumers purchase less of the good is that they

susitutes

When the price of a good or service goes up, consumers will tend to

switch to less expensive substitutes.

onsider a market for skateboards in which there are 3 potential buyers. The first has a reservation price of $100, the second has a reservation price of $200, and the third has a reservation price of $300. If skateboards sell for $150 and if each potential buyer only wants one skateboard, then what will be total consumer surplus in this market?

200

Consider a market for snowboards in which there are 4 potential buyers. The first has a reservation price of $200; the second has a reservation price of $300; the third has a reservation price of $400; and the fourth has a reservation price of $500. If snowboards sell for $250 and if each potential buyer only wants one snowboard, then total consumer surplus in this market will be dollars.

450

what words descibe used to describe a particular combination of goods.

bundle

The difference between a buyer's reservation price for a product and the price a buyer actually paid is _____.

consumer surplus

f a consumer is indifferent between two different consumption bundles, then this implies that the consumer

egards the two bundles as equivalent

True or false: Economists believe that our preferences for different goods and services do not change over time.

f

A consumer's optimal combination of goods is

he affordable combination that yields the highest total utility.

Sven likes to water ski, but can only water ski during the one week that he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day.Sven's total utility _______ with each hour that he skied.

increa

During Thanksgiving you participated in a pumpkin-pie eating contest since you love pumpkin pie. You really enjoyed the first two pies, the third one was OK, but as soon as you ate the 4th one you became ill and lost the contest. Your total utility _______ with each pie you ate up to the 3rd pie.

increase

A(n) _____ traces out the set consumption bundles that a consumer likes equally well.

indifferance curve

A(n) _____ tells us how various bundles are ranked in order of preference, while a(n) _____ tells us which bundles are affordable

indifference curve map; budget constraint

The affordable combination of goods that yields the highest total utility for a consumer

is the optimal combination of goods for a consumer

which law states that spending should be allocated across goods so that the marginal utility per dollar is the same for each good.

rational spending rule

True or false: economists believe that our preferences for different goods and services can be influenced by our peers.

t

rue or false: Once people have acquired the food, shelter, and clothing required to maintain their health, economists refer primarily to the goods and services people "want" rather than those they "need".

t

The difference between a buyer's reservation price for a product and the price the buyer actually paid is known as

teh consumer surplus

According to the rational spending rule, spending should be allocated across goods so that

the marginal utility per dollar is the same for each good.

Total utility refers to the

total satisfaction that people derive from all of their consumption activities.

The process whereby people allocate their income between different goods and services in order to maximize their total satisfaction is known as

utility maximization

The law of diminishing marginal utility captures the tendency for the _____ gained from consuming an additional unit of a good to diminish as consumption increases beyond some point.

additional utility

The additional utility gained from consuming an additional unit of a good is called

marginal utility

As living standards improve

needs remain the same, but wants increase.

Utility maximization means that people try to allocate their ______ to maximize their ___________.

resources, satisfacti

Suppose that in response to an increase in the price of sugar, people switch from using sugar to corn syrup. This is an example of ____ of a price change.

substiution effect

Once people have achieved bare subsistence levels of consumption, economists emphasize that we can talk mainly in terms of people's ______.

wants

A(n) _____ tells us how various bundles are ranked in order of preference, while a(n) _____ tells us which bundles are affordable.

ndifference curve map; budget constraint

which law captures the tendency for the additional utility gained from consuming an additional unit of a good to diminish as consumption increases beyond some point.

the law of diminshing marginal utility

An indifference curve map tells us _______, while a budget constraint tells us _______.

how various bundles are ranked in order of preference; which bundles are affordable

Ten years ago you had never even heard of wireless internet. Now you complete assignments for class on a laptop that accesses the Internet using wireless technology. This is evidence tha

needs remain the same, but wants change.