Question

A​ consumer's budget constraint refers to the collection of all possible bundles that​ ___________. A. a consumer finds suitable for possible purchase. B. a consumer can purchasea consumer can purchase with her income C. give the consumer the same degree of satisfaction. D. exactly exhaustexactly exhaust a consumer's entire budget. A decrease in a​ consumer's income causes her budget constraint to encompass________ bundles. A. more B. fewer Why does a demand curve with a constant slope not have a constant​ elasticity? A. Slope is based on absolute change and elasticity is based on percentage change. B. Slope is based on percentage change and elasticity is based on absolute change. C. Elasticity depends on more variables than does slope. D. Slope measures responsiveness and elasticity measures change. The price elasticity of demand for a good is likely to be moremore elastic​ __________. A. the larger the number of close substitutes for the good. B. the higher the budget share spent on the good. C. the longer the available time during which consumers can adjust. D. all of the above.

Answer 1

(1) (D)

Budget constraint is the combination of goods which consumer can buy by exhausting the budget.

(2) (B)

Decrease in income shifts budget line inward towards origin, so less of the goods can be afforded.

(3) (A)

Slope of demand curve = Change in vertically measured variable (price) / Change in horizontally measured variable (quantity)

Elasticity = % Change in quantity / % Change in price

(4) (D)

The more the available substitutes, the higher the proportion of budget comprised by the good and the longer the time frame, the more elastic demand is.