Econ. Ch. 6: Consumer Choices
differing levels of family income, geographical location of households, & household pref.
All cause variation in American household expenditures
How does the U.S labor... gather information w/regard to the typical consumption choices of Americans
Consumer expenditures Survey
____decribes a situation where a _______ causes a reduction in the buying power of income even though actual income has not changed
Income effect//higher price
The most common pattern for marginal utility is
diminishing marginal utility
Substitution & income effect of a changes in price of a good may be used to explain the
direct relationship btw income & demand
Inferior good is a product
for which the demand decrease as income increase
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
Key assumptions that accompanies the use of numbers for measuring utility is
individuals choose based on their preference
Saving money is an ______ b/c it involves less consumption in the present but the ability to consume more in the future
intemporal choice
The ______ budget constraint shows the tradeoff btw present & future consumption
intemporal choice
Which of the following is considered to be a tell-tale signal that the point with the highest total utility had been found?
marginal utility per dollar is the same for both goods
A decrease in consumer preference for a product, other thing being equal, will cause
market demand to shift left
the function of utils
measurement of utility
The typical pattern revealed in a budget constrain model shows that as the quantity consumed rises
total utility rises; marginal utility falls
ability of a good/service to satisfy wants
utility
the marginal utility of two goods changes
w/the quantities consumed
Marginal utility can be:
positive, negative, or zero
as a general rule utility-maximizing choices between consumption goods occur where the
price ratio & marginal utility ratio of two goods is equal
Marginal Utility
refers to the additional utility provided by one additional unit of consumption
Econ,. determine total utility by:
Multiplying the marginal utility of last unit consumed by # of units consumed
Which occurs simultaneously with the income effect?
substitution effect
What portion of annual consumptions is typically spent by American households on shelter?
1/2
Diminishing Marginal Utility
describes the common pattern whereby each marginal unit of a consumed good provided less of an addition to utility than the previous unit
Substitution effect
rises when a price changes because consumers have a incentive to consume less of the good with a relatively higher price & more of the good with a relatively lower price