ECON 1050 Chapter Notes - Chapter 8: Normal Good, Opportunity Cost, Prefrontal Cortex

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rubyhamster299

14 Apr 2017

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The choices you make as a buyer of goods and services are influenced by many factors: consumption possibilities. Consumption possibilities are all the things that you can afford to buy. Everything you can buy is limited by your income and by the prices you must pay. A budget line- marks the boundary between those combinations of goods and services that a household can afford to buy and those that it cannot afford. When prices or income change, consumption also changes, a rise in income shifts the budget line outward but leaves the slope unchanged. A change in price changes the slope of the line: preferences. A choice that she makes depending on preference- what she likes and dislikes. Utility- the benefit or the satisfaction a person gets from the consumption of goods or service. Total utility- the benefit that a person gets from the consumption of all the different goods and services.

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

Consider an individual making choices over two goods, x and y with prices px and py, and who has income:

Suppose that, as a result of changes in the individual's economic circumstances, the budget line rotates outward, with the vertical (good y) intercept remaining unchanged but the horizontal (good x) intercept shifting to the right. Explain how this could have happened if the price of good x did not change?

If the individual's utility function is u(x; y) = x 2 + 4y 2 , are these preferences convex? Are they monotonic? Explain.

coffeegnu443

To look at changes in the cost of living, we don't track the differences in each households actual expenditures from one year to the next on a market basket because:

Instructions: You may select more than one answer.

a) consumers may substitute the relatively expensive goods with those goods whose prices have not increased rapidly as certain goods become more expensive.

b) actual expenditures may include spending outside the country.

c) people's consumption patterns may change due to tastes or changes in income that have nothing to do with changing prices.

d) innovation can lead to the introduction of new products or improvements on existing products.

e) actual expenditures may include spending on goods and services used as inputs in the production process.

coralsalmon14

ECON 1050 Chapter Notes - Chapter 8: Normal Good, Opportunity Cost, Prefrontal Cortex

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