Chapter 6 Microeconomics
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
The budget constraint framework suggest when income rises, households will demand a higher quantity of _______ goods, but a lower quantity of ______ goods
Normal, inferior
The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises,
Total utility rises, but marginal utility falls
In microeconomic terms, the ability of a good or a service to satisfy wants is called:
Utility
The economic analysis of household consumption behavior is based on the assumption that people seek the highest level of _____________.
Utility or satisfaction
Marginal utility can:
be positive, negative, or zero
Alex has $18 per week in his entertainment budget. He splits his time between going to the movies and renting video games. Each movie costs $6 while each video game rental costs $3. The measured total utility of each of his activities is shown in the table below. What is Alex's utility maximizing point?
1 movie, 4 video game rentals
Kim has $24 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $8 while each yoga class costs $3. The total utility from each of these activities is set out in the table below. What is Kim's total utility maximizing point?
1 movie, 5 yoga classes
Terry attends college and works part-time job in a drug store. She can work up to 30 hours each week, and is paid $9 per hour. The table below shows her utility from different levels of leisure and income. If Terry decides to work 20 hours per week, her total utility from both leisure and income would be:
137
Troy has a part-time job in a book store to help pay for his college. He can work up to 30 hours each week at his job, which pays $9 per hour. The table below shows his utility from different levels of leisure and income. Troy currently works 20 hours per week. If he decides to work 30 hours instead, his marginal utility gain from the additional income is ____.
9
In terms of microeconomic analysis, what is the function of "utils"?
A measurement of utility
How does the U.S. Bureau of Labor Statistics gather information with regard to the typical consumption choices of Americans?
Consumer Expenditure Survey
The most common pattern for marginal utility is ____________________.
Diminishing Marginal Utility
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 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
When Marietta chooses to purchase a combination of goods that lie within her budget line, she:
Is maximizing utility
The term _________________ refers to the additional utility provided by one additional unit of consumption.
Marginal Utility
An inferior good is a product:
for which demand decreases as income increases.
Approximately what portion of annual consumption is typically spent by American households on shelter?
one-third
When the price of a good _____, households will typically demand ____ of that good.
rises, less
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
Which of the following occurs simultaneously with an income effect?
substitution effect
Economists are able to determine total utility by:
summing up the marginal utilities of each unit consumed.