ECON 230D1 Chapter Notes - Chapter 5: Greek People'S Liberation Army, Tax Rate, Engel Curve

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goldtortoise998

1 May 2017

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Consumer theory is uses to show how much the qd of a good falls as its p rises. When p rises, budget constraint shifts, forcing consumer to choose new optimal bundle. The price consumption curve is the line that goes through the optimal bundles. so = d curve. Engel curve is the relationship between the qd of a single good and income holding p constant. Income elasticities show how much the qd changes as income increases. It summarises the shape of the engel curve. Rms use it to predict the effect of an income tax. Normal good: as much or more is demanded if income rises, and have =0 or + income elas . Inferior good: less is demanded if income rises. When comparing two goods, at least one must be normal. Holding all factors except price constant, has two effects on d:

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interval (or arc) elasticity

cross-price elasticity

price elasticity of demand

elastic demand

income elasticity

inelastic demand

inframarginal units

marginal revenue

point elasticity

price effect

quantity effect

total revenue

unitary elastic demand

1. __________________ A measure of consumersâ sensitivity or responsiveness to changes in the price of a good or service.

2. ___________________ When the percentage change in price (in absolute value) is more than the percentage change in quantity demanded (in absolute value).

3. ___________________ When the percentage change in quantity demanded (in absolute value) is more than the percentage change in price (in absolute value).

4. ___________________ When the percentage change in quantity demanded (in absolute value) is just equal to the percentage change in price (in absolute value).

5. ___________________ Total amount paid to a producer for a good or service P * Q.

6. ___________________ The effect on total revenue of a change in price, holding quantity constant.

7. ___________________ The effect on total revenue of a change in quantity, holding price constant.

8. ___________________ An elasticity calculated over an interval of a demand curve or demand schedule.

9. ___________________ Elasticity at a specific price or point on a demand curve.

10. ___________________ A measure of how responsive quantity demanded is to a change in income, all other things constant.

11. ___________________ A measure showing how responsive the quantity demanded of one good is to changes in the price of another good, other factors constant.

12. ___________________ The additional revenue received by producing and selling one more unit of output.

13. ___________________ Units of output that could have been sold at a higher price had the firm not lowered its price to sell additional (marginal) units.

coffeehornet269

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

1. If marginal utility is negative, total utility is

a. Positive

b. Negative

c. Decreasing

d. Constant

e. Increasing

2. If utility-maximizing consumers face identical prices, they will have identical

a. Marginal utilities for each good

b. Ratio of marginal utilities for each good

c. Preferences

d. Ratios of total utilities for each good

e. Total utilities for each good

3. The substitution effect

a. Always increases quantity demanded of a good whose relative price has fallen

b. Is opposite in sign to the income effect for all normal goods

c. Is opposite in sign to the income effect for all normal goods

d. May cause demand curves to be upward sloping

e. Is always dominated by the income effect for normal goods

4. Demand curves for normal goods slope downward because

a. The substitution effect of a price change is greater than the income effect

b. Substitution and income effects work in the same direction

c. The income effect is always greater than the substitution effect

d. The income effect is always less than the substitution effect

e. None of the above

5. The idea that a consumer derives less additional satisfaction from consuming successive units of a good is called

a. Diminishing consumer surplus

b. The paradox of value

c. Diminishing marginal utility

d. Diminishing total value of consumption

e. Diminishing total utility

indigolocust149

ECON 230D1 Chapter Notes - Chapter 5: Greek People'S Liberation Army, Tax Rate, Engel Curve

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