ECON 203 Study Guide - Quiz Guide: Supply And Demand, Budget Constraint, Indifference Curve

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erinturtle274

1 Apr 2016

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The market price: budget constraint: represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income. The short run is not a definite period of time, but rather varies based on the length of the firm"s contracts: long run: a period of time in which all factors of production and costs are variable. 2. 3 suppose you observe, on several occasions, bob"s buying behavior in a. Supermarket that sells only 2 goods x and y. Suppose that for each observed basket (x, y) that is purchased, you know the prices of the goods px and py, and the amount of money m bob had to spend. In other words, you are able to observe bob"s demand functions x = hx (px, py, m) and y = hy (px, py, m). Construct a model to explain bob"s buying behavior.

Related Questions

budget line

marginal utility

complete property of preferences

market demand

consumption bundle

substitution effect

Giffen good

total effect

income effect

transitive property of preferences

indifference curves

utility

the marginal rate of substitution

utility function

1.	_____	The satisfaction or benefit that consumers receive from consuming goods or services.
2.	________________ _	A particular combination of specific quantities of goods or services
3.	________________ _	Consumers can rank all conceivable bundles of goods or services
4.	_____	If A is preferred to B, and B is preferred to C, then A is always preferred to C.
5.	_____	Equation showing a consumerâs perception of the total utility forthcoming from consuming each bundle of goods and services.
6.	_____	A set of consumption bundles each and every one of which provides a consumer with exactly the same level of total utility.
7.	_____	The number of units of Y that must be given up for total utility to remain the same when one more unit of X is consumed.
8.	_____	The addition to total utility attributable to consuming one more unit of a good, holding the consumption of all other goods constant.
9.	_____	The line showing all bundles of goods that can be purchased at given prices if the entire income is spent.
10.	_____	The change in the consumption of a good that would result if the consumer remained on the original indifference curve after the price of the good changes.
11.	_____	The change in consumption of goods results strictly from the change in purchasing power after the price of a good changes.
12.	________________ _	The sum of the substitution and income effects.
13.	_____	A good for which quantity demanded varies directly with price, causing an upward sloping demand curve.
14.	_____	A list of prices and the corresponding quantity consumers are willing and able to purchase at each price.

blushwildebeest943

Respond True or False to the following, and explain why each answer is True or False:

a. If two goods x and y are perfect complements, then if the price of x falls, the entire change in demand for x is due to the income effect.

b. A consumer has the utility function given by U=min{x1,2x2}. If good 2, has a price of zero, the consumer will always strictly prefer more of good 2 to less.

c. Ivan spends his entire income on two goods. One of them is a Giffen good. If the price of the Giffen good rises, demand for the other good must fall.

d. Jimmy's utility function is U(a,b) = ab, where a is his consumption of apples and b is his consumption of bananas. If prices and income change in such a way that Jimmy's old consumption bundle lies on his new budget line, then Jimmy will not change his consumption bundle.

blueantelope865

True or False. If False explain why it's false.

1. If all prices are doubled an money income is the left the same, the budget set does not change because the relative prices do not change.

2. A decrease in income pivots the budget line around the bundle initially consumed.

3. If preferences are well-behaved, then for any commodity bundle (x1,x2), the set of commodity bundles that are worse than (x1,x2) is a convex set.

4. The marginal rate of substitution measures the distance betwee one indifference curve and the next one.

5. If someone has the utility function U= 2min(x, y), then x and y are perfect complements for that person.

6. At the boundary optimum, a consumers indifference curve must be tangent to her budget line.

7. If two goods are substitutes, then an increase in the price of one of them will increase the demand for the other.

8. An Engel curve is a demand curve with the vertical and horizontal axes reversed.

9. An inferior good is less durable than a normal good.

10. When other variables are held fixed, the demand for a Giffen good rises when income increase.

ECON 203 Study Guide - Quiz Guide: Supply And Demand, Budget Constraint, Indifference Curve

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