PEARSON REVIEW QUESTIONS

when the absolute value of the price elasticity of demand is >1, the % change in quantity demanded is _____ than the % change in price (meaning that any price increase --> lower revenues)

greater

if the price of good x is $60 and the price of good y is $70, what is the opportunity cost of buying one unit of good y?

1.167 ($70/$60)

demand curve

an individual's willingness to pay over different quantities of the same good

when optimizing, the marginal benefit gained from the last dollar spent on each good is __________

equal

for a consumer with a given level of income, the combinations of goods for the budget set will be _______ than for the budget constraint

higher

if the price of a good decreases, what happens to the budget constraint graph?

pivots outward and the slope changes

a consumer's satisfaction is maximized when the marginal benefit from the last dollar she spent on one good is equal to the marginal benefit from the last dollar she spent on another good because

the reality of diminishing marginal benefits assures that any shift in consumption toward either good must necessarily make her worse off