Economics (Indifference curves & Budget lines; costs) (09/08/22)

What explains the slope of an individual's demand curve for a normal good?

• Market imperfections

• Diminishing Marginal Utility

• The law of variable proportions

• Diminishing returns

A consumer's budget line shifts from GH to JK. Regardless of any other changes that might occur, what must be correct?

• There has been an increase in the consumer's real income

• There has been an equal proportionate increase in the price of X and Y

• There has been an equal proportionate decrease in the price of X and Y

• There has been an increase in the consumer's money income

In the diagram, a consumer's budget line shifts from GH to JK. What must be true?

• The prices of both goods have changed

• There has been no change in the consumer's money income

• The price of good Y has increased relative to the price of good X

• There has been no change in the consumer's real income

A consumer seeks to maximise their utility. Up to what point should they continue to consume each good?

• until the marginal utility from each good is the same

• until the marginal utility per dollar of each good is the same

• until the marginal utility from each good reaches a maximum

• Until the marginal utility from each good is zero

The line RS shows the different combinations of X and Y that a consumer can afford with his income. (continues in image)

• equal percentage increases in his income and in both prices

• an increase in the price of X and an increase in his income

• a decrease in the price of X and a bigger percentage increase in Y's price

• a change in his tastes

The diagram shows the levels of utility corresponding to different allocations of resources between two people.

• A

• B

• C

• D

Why does a normal demand curve for a product slope downwards from left to right?

• The average cost of production falls as the scale of production increases

• Buyers' additional satisfaction declines as consumption rises.

• Sellers are willing to accept lower prices on larger orders.

• Consumers are faced with choices between competing products.

What is not held constant when calculating the income effect of a change in the price of a good?

• the prices of other goods

• the consumer's real income

• the consumer's real income

• the consumer's money income

What is not held constant when calculating the substitution effect of a change in the price of a good?

• the consumer's money income

• the consumer's tastes

• the consumer's expenditure on other goods

• the prices of other goods

In the diagram, a consumer's budget line shifts from JK to JH. What can definitely be concluded from the diagram?

• There has been no change in the price of good X

• There has been an increase in the consumer's real income

• There has been a decrease in the consumer's money income

• There has been a decrease in the price of good Y