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At each point on an indifference curve |
total utility is the same |
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Budget lines & Indifference curves |
budget lines are linear and down sloping, indifference curves are down sloping and convex to the origin |
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Marginal utility |
change in total utility obtained by consuming one more unit of a good |
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The budget line shows: |
all possible combinations of two goods that can be purchased, given money income and the prices of the goods |
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If marginal utility is diminishing and is a positive amount: |
total utility will increase |
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A consumers demand curve for a product is downsloping bc: |
marginal utility diminishes as more of a product is consumed |
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Most economists contend that: |
noncash gifts are less efficient than cash gifts |
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Increases in product prices shift the consumer’s: |
budget line to the left |
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Frank is purchasing products C and D in utility-maximizing amounts. if the price of C is $4 and the price of D is $2, then: |
the marginal utility of C is twice that of D |
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The diamond-water paradox arises bc: |
essential goods may be cheap while nonessential goods may be expensive |
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In moving along a given budget line: |
the prices of both products and money income are assumed to be constant |
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Noncash gifts: |
reduce recipient utility relative to cash gift bc noncash gifts often fail to match recipient preferences |
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The law of diminishing marginal utility states that: |
beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer |
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The marginal rate of substitution measures the: |
consumers’ willingness to substitute one product for another so that total utility will remain constant |
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What do the income effect, substitution effect, and diminishing marginal utility have in common? |
that all help explain the downsloping demand curve |
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Any combination of goods lying outside of the budget line: |
is unattainable, given the consumers income |
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To maximize utility, a consumer should allocate money income so that the: |
marginal utility obtained from the last dollar spent on each product is the same |
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An indifference map implies that |
curves farther from the origin yeild higher levels of total utility |
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The utility of a good or service |
is the satisfaction or pleasure one gets from consuming it |
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The theory of consumer behavior assumes that consumers attempt to maximize: |
total utility |
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The slope of a budget line reflects the: |
price ratio of the 2 products |
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The law of diminishing marginal utility explains why: |
demand curves slope downward |
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Mary says "you would have to pay me $50 to attend that pro wrestling event", for mary, the marginal utility of the event is: |
negative |
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Most people do not steal bc: |
their marginal costs, including guilt costs, are too high |
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Total Utility may be determined by: |
summing the marginal utilities of each unit consumed |
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The theory of consumer behavior assumes that: |
consumers behave rationally, attempting to maximize their satisfaction |
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