Econ Chapter 6

jane has $500 a week to spend on clothing (c) and food (f). the price of clothing is $25 and the price of food is $10. what is the equation for jane's budget constraint

$25 x clothing + $10 x food = $500

ted has $600 a week to spend on clothing (c) and food (f) the price of clothing is $30 and the price of food is $5. what is the equation for Ted's budget constraint

$30 x clothing +$5 x food=$600

sue is maximizing her utlity. her MUx/Px=10 and MUy/Py=40 therefore the price of Y must be

$4

jim has $600 a week to spend on clothing and food. the price of clothing is $30 and the price of food is $5. the clothing and food pairs in jim's choice set include ___ units of clothing and ___units of food

10, 60

jane has $500 a week to spend on clothing and food. the price of clothing is $25 and price of food is $10. jane spends her entire income when she purchases ___ units of clothing and ____ units of food

12, 20

jane has $500 a week to spend on clothing and food. the price of clothing is $25 and the price of food is $10. the clothing and food pairs in jane's choice set include _______ units of clothing and _____ units of food.

8, 30

a utility-maximizing consumer buys so as to make ___ for all pairs of goods

MUx/MUy=PxPy

a consumer satisfies the condition ____ when her indifference curve is just tangent to her budget constraint

MUx/Px=MUy/Py

assume sally is initially in equilibrium and that X and Y are normal goods for her. then the price of X rises. for sally to move to a new equilibrium point her consumption of

X must decrease

the law of diminishing marginal utility refers to

a consumer's decrease in additional satisfaction as she consumes more and more units of a good

marginal utility is the ____ satisfaction by consuming ____ of a good.

additional, one more unit

the marginal utility of the first cup of coffee that tom drinks in the morning is worth $2.00. the marginal utility of the 9th cup of coffee he drinks is positive while the marginal utility of the 10th cup of coffee he drinks in the morning is worth $0. this implies that at a price of $0, tom would drink

at most 10 cups of coffee per morning

Kathleen likes avocado and crab dip. after eating avocado and crap dip with four crackers, she switches to cheese with crackers. we can conclude that

at this point cheese and crackers have a higher marginal utility per dollar spent than that of avocado and crab dip with crackers

for normal goods, the substitution and income effect of a price decrease will

both increase the quantity of the food demanded

a price change would have the largest income effect on a

car

Richard is consuming X and Y so that he is spending his entire income and MUx/Px=6 and MUy/Py=-10 to maximize utility he should

consume less X and more Y

an assumption underlying indifference curve analysis is that MUx/MUy ____ as more of X and less of Y is consumed

decreases

the law of diminishing marginal utility implies that

demand curves always slope downward and to the right

the diamond/water paradox states that things with the ____ value in use frequently have _____ value in exchange

greatest, little or no

assume leisure is a normal good. the substitution effect of a wage decrease implies a ____ demand for leisure and a ____ labor supply

higher, lower

for matthew, the marginal utility of the 9th soda in a day is positive and the marginal utility of the 10th soda in a day is zero. this

implies that at a zero price Matthew's demand curve will intersect the quantity axis at 10

assuming that leisure is a normal good, if an individual's labor supply curve is backward bending, then the

income effect outweighs the substitution effect at higher wages

price decreases will ____ a household's choice set

increase

as you move up an indifference curve, the absolute value of the slope

increases

assume leisure is an inferior good instead of a normal good this income effect of a wage increase will lead o a ____ demand for leisure and ____ labor supply

lower, higher

katy eats five slices of pizza on a Saturday night but admits each slice of pizza doesn't taste as good as the previous one. this suggests that for katy the

marginal utility of a slice of pizza is positive but decreasing

we can state the utility-maximizing rule in words in the following way: a person maximizes utility when she equalizes the ____ across products

marginal utility per dollar spent

jon is consuming X and Y so that he is spending his entire income and MUx/Px=8 an MUy/Py=4. to maximize utility he should consume

more X and less Y

assuming that charitable giving is a normal good, the income effect of a decrease in personal tax rates would lead to

more giving because households would have more disposable income

we derive the demand curve for X from indifference curves and budget constraint by changing the

price of X

a car's real cost is its opportunity cost. opportunity cost is determined by

relative prices

Michael can buy either pizzas or submarine sandwiches. if the prices of pizzas and submarine sandwiches doubles so does Michael's money income, we can conclude that Michael's budget constraint will

remain unchanged

Michael can buy either pizza or submarine sandwiches. if the prices of pizzas and submarine sandwiches double and Michael's money income triples, we can conclude that Michael's budget constraint will

shift out but remain parallel to the old one

if household's income doubles, its budget constraint will

shift out parallel to the old one

if MUx/Px<MUy/Py, then

spending a dollar less on X and a dollar more on Y increases utility

a rise in the price of pepsi that causes a household to shift its purchasing pattern toward Coke and away from pepsi is the _____ effect of a price change

substitution

the ratio of the marginal utility of coffee to the marginal utility of donuts is four for an individual maximizing utility. this implies that

the coffee to donuts price ratio is four to one

harry tells you that he prefers pepsi to coke, coke to 7-up, and 7-up to pepsi. this violates what assumption made when analyzing consumer preferences?

the consumers are rational

the recession of 2008-2009 has resulted in a tight job market, especially for recent college graduates. in a tight job market

the opportunity cost of accepting an unpaid internship is lower than it is when jobs are plentiful

ellen is spending her entire income on good X and Y. her marginal utility from the last units of X and Y that she consumes is 25. Ellen's utility is only maximized if

the price of X and Y are the same

ellie is spending her entire income on goods X and Y. her marginal utility from the last unit of X is 100 and the marginal utility from the last unit of Y that she consumes is 50. ellie's utility is only maximized if

the price of good X is twice that of good Y

jon is consuming X and Y so that he is spending his entire income and Mux/Px=4 and MUy/Py=4 to maximize utility he should consume

the same amount of X and Y since he is already maximizing utility

for inferior goods, the substitution and income effects of a price increase will

the substitution effect will decrease the quantity of the good demanded while the income effect will increase the quantity of the good demanded

total utility is

the total amount of satisfaction yielded by the consumption of a good or service

if the substitution effect of a wage change outweighs the income effect of a wage change, the labor-supply curve is

upward sloping