Consumer Choice

Which of the following helps explain why the demand curve for a normal good is downward sloping? 

• The income effect moves the quantity demanded in the opposite direction of the substitution effect 
• The income effect dominates the substitution effect 
• The income and substitution effects move the quantity demanded in the same direction 
• With an increase in income, the consumer decreases consumption of the good

Assume that people like onions on their hamburgers. If the supply of hamburgers decreases, the demand for onions will most likely: 

• increase because hamburgers and onions are substitutes 
• increase because hamburgers and onions are complements 
• decrease because hamburgers and onions are substitutes 
• decrease because hamburgers and onions are complements 

The slope  of indifference curve is equal to

• price ratio
• marginal opportunity cost
• marginal rate of substitution 
• all of these

An indifference curve slopes down towards right since more of one commodity and less of another result in

• same level of satisfaction
• greater satisfaction
• maximum satisfaction
• any of the above

Which of the following statements is incorrect?

• An indifference curve must be downward-sloping to the right
• Convexity of a curve implies that the slope of the curve diminishes as one moves from left to right
• The income elasticity for inferior goods to a consumer is positive
• The total eff­ect of a change in the price of a good on its quantity demanded is called the price eff­ect

The second glass of lemonade gives lesser satisfaction to a thirsty boy. This is a clear case of

• Law of demand
• Law of diminishing returns
• Law of diminishing utility
• Law of supply

The aim of the consumer in allocating his income is to ____________________

• maximize his total utility
• maximize his marginal utility
• to buy the goods he wants most whatever the price
• to buy the goods which he expects to be short in supply

The slope of indifference curve is given by

• MRS between two goods
• MRTS between two goods
• MRT between two goods
• None of the above

The slope of budget line is given by

• Px/Py
• MUx/Muy
• dX/dY
• None of the above

Shape of indifference curve is a right angled triangle in case of

• Substitute goods
• Complementary goods
• Neutral goods
• None of the above