Theory of Consumer Behavior

Which of the following statements regarding utility is not true?

• It is a satisfying power of a commodity.

• It is purely a subjective entity

• Utility is always measurable

• It helps consumers to make choices

_____________ is the addition to total utility by the consumption of one additional unit of the commodity?

• Total utility

• Ordinal utility

• Average utility

• Marginal utility

Which of the following utility approach suggests that utility is a measurable and quantifiable entity?

• None of these

• Ordinal approach

• Cardinal approach

• Both cardinal & ordinal

___________ shows various combinations of two goods that give same amount of satisfaction to the consumer?

• Isoquant

• Indifference curve

• Isocost curve

• Marginal utility curve

Indifference curve slopes___________?

• Downward to the right

• Downward to the left

• Upward to the left

• Upward to the right

According to the law of diminishing marginal utility, _________?

• Additional consumption always yields extra utility

• Additional consumption leads to lower average total utility

• Additional consumption always yields negative utility

• After a point any addition in the consumption causes a reduction in total utility.

What is called point of satiety?

• The point where marginal utility becomes less than zero

• The point where marginal utility becomes greater than zero

• The point where marginal utility becomes zero.

• None of above

Indifference curve represents?

• More than two commodities

• Four commodities

• Only two commodities

• Less than two commodities

When the price of a product falls for a normal good, the:

• income and substitution effects will encourage consumers to purchase more of the product

• income and substitution effects will encourage consumers to purchase less of the product.

• substitution effect will encourage consumers to purchase less of the product and the income effect will encourage them to purchase more.

• substitution effect will encourage consumers to purchase more of the product and the income effect will encourage them to purchase less

George consumes only two goods, pizza and compact discs. Both are normal goods for George. Suppose the price of pizza decreases. George's consumption of compact discs will:

• increase due to the income effect.

• increase due to the substitution effect.

• increase due to a negative income elasticity

• remain unchanged, since the income elasticity of pizza is greater than 0.