Question

1. A new ________ that is parallel to the first one, but just tangent to the new indifference curve, will reveal the real-income effect.

maximization point

perfect substitute curve

perfect complement curve

budget constraint line

indifference curve

2. Marginal utility

occurs when total utility declines as consumption increases.

is the additional satisfaction derived from consuming one more unit of a good or service.

is the combination of goods and services that maximizes utility for a given income.

occurs when a consumer buys more of a good as a result of a relative price change.

occurs when there is a change in purchasing power as a result of a change in the price of a good.

3. The change in utils for each change in units consumed is known as the

total utility.

slope.

diminishing marginal utility.

unity of utility.

marginal utility.

4. A typical indifference curve that reflects the trade-off between two goods that are not ________ or ________ has a marginal rate of substitution that falls between these two extremes.

“goods”; “bads”

perfect substitutes; perfect complements

opportunity costs; utility costs

right angles; straight lines

intersections; intrasections

Answer 1

1..)

Answer: Budget line constraint.

Change in real income of consumer pushes up budget line parallel to first one.

It touches new indifference curve thereby signifying higher level of satisfaction.

2)

Answer: is the additional satisfaction derived from consuming one more unit of a good or service.

Marginal utility is change in total utility resulting from one additional unit consumption.

3)

Answer: Marginal utility.

Marginal utility is change in total utility owing to one unit change in consumption.