ECON 111
To maximize utility a consumer should allocate money income so that the
marginal utility obtained from the last dollar spent on each product is the same
The demand curve slopes downward to the right because
of the law of demand
The demand curve shows the relationship between
price and quantity demanded
the higher the price of a good, the smaller is the quantity demanded
the degree of substitutability between the two goods
The law of demand states that, other things remaining the same,
the higher the price of a good, the smaller is the quantity demanded
The magnitude of the slope of an indifference curve is
the marginal rate of substitution
Graphically, the horizontal sum of all individual demand curves is known as:
the market demand curve
most important variable in determining the quantity demanded
the price of the product itself
Good X is measured on the horizontal axis and good Y is measured on the vertical axis. The marginal rate of substitution is
the relative price of good Y in terms of good X
In consumer equilibrium
total utility is maximized given the consumerʹs income and the prices of goods
The fact that your fourth slice of pizza does not generate as much satisfaction as your third
diminishing marginal utility
The income and substitution effects account for:
downward sloping demand curve
The diamond-water paradox arises because
essential goods may be cheap because plentiful while nonessential goods may be expensive because scarce
An increase in the price of ground beef
increases the demand for chicken, a substitute for ground beef, decreases the quantity demanded of ground beef
An increase in income
increases the demand for turnips if a turnip is a normal good
Which one of the following statements about the budget line is false? The budget line
is based on fixed quantities
If total utility is increasing, marginal utility
is positive, but may be either increasing or decreasing
Suppose that MUx/Px exceeds MUy/Py. To maximize utility the consumer who is spending all her money income should buy
. more of X and less of Y
A price elasticity of demand of 2 means that a 10 percent increase in price will result in a
20 percent decrease in quantity demanded
inelastic demand
A change in price has relatively little effect on quantity demanded
If John consumes only two goods, A and B, and he is maximizing his utility subject to his budget constraint
MUA/MUB equals the ratio of the price of A to the price of B
A consumer is maximizing her utility with a particular money income when:
MUa/Pa = MUb/Pb = MUc/Pc = ... = MUn/Pn.
Diminishing marginal utility means that
Ralph will enjoy his second hamburger less than the first one
At the best affordable point, what is the relationship between the indifference curve and the budget line
The slope of the indifference curve equals the slope of the budget line
Which one of the following is not true in consumer equilibrium?
The total utilities of all goods are equal
An indifference curve is
a line that shows combinations of goods among which a consumer is indifferent
The price of one good divided by the price of another good is
a relative price
A preference map is
a series of indifference curves
A turnip is an inferior good if
an increase in income decreases the demand for turnips
Which one of the following events shifts the demand curve for grape jelly to the right?
an increase in income if grape jelly is a normal good
