ECON 1000 Lecture 1: DELETE

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8 Mar 2017

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Consumption possibilities are limited by income and by the prices of movies and pop. 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. Consumption possibilities change when income or prices change. A rise in income shifts the budget line outward but leaves its slope unchanged. A change in a price changes the slope of the line. The budget line shows what is possible; preference determine which possibility is chosen. Preferences a description of her likes and dislikes. The concept of marginal benefit and the marginal benefit curve. A marginal benefit curve is also a demand curve. The goal of a theory of consumer choice is to derive the demand curve from a deeper amount of how consumers make their buying plans. Utility as the benefit or satisfaction that a person gets from the consumption of 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

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.

n this assignment you will apply consumer choice theory and marginal analysis to business problems. Consider each of the following products and services: a pair of tickets to a sporting or cultural event that you enjoy a can of common table salt a college class In a two-page essay: Explain how your own current household budget, tastes and preferences, and future expectations determine how much of each of these products you purchase in a year. Describe the benefits (utility) you get from each product and service. Suppose the price of the tickets were cut in half. How would your consumption of cultural or sporting goods change? Why? Suppose your household budget was suddenly doubled because you received a 100% raise. How would your consumption of each of these goods and services change? Explain your answer in terms of utility and marginal analysis. What is the law of diminishing marginal utility? How does this law affect the ability of table salt companies to stimulate demand for their product?

ECON 1000 Lecture 1: DELETE

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