Suppose that MUx/Px for good X exceeds MUy/Py for good Y. To maximise utility, the consumer who is exhausting his/her money income, should buy:
D. More of X and less of Y.
A consumer's demand curve for a product is downward-sloping because:
B. Marginal utility diminishes as more of a product is consumed.
Total utility may be determined by:
A. Summing the marginal utilities of each unit consumed.
'A fall in the price of a good increases the real income or purchasing power of consumers, so that they are able to buy more of the product.' This statement best describes:
A. The income effect
If the price of normal good X rises, the income effect:
C. and substitution effect will induce the consumer to buy less of X.
The ‘income effect' indicates that:
A. a rise in money income will cause consumers to buy smaller quantities of normal goods.
B. when the price of a product falls, the lower price will induce the
consumer to buy more of the product, once it is relatively cheaper.
C. consumers should substitute various products until the marginal utility
from the last unit of each product purchased is the same.
D. when the price of a product falls, a consumer will be able to buy more of it with a given money income.
D. when the price of a product falls, a consumer will be able to buy more of it with a given money income.
If the price of a product falls, that product becomes cheaper, and people will want to purchase more of it in place of other goods.' This statement best describes:
D. the substitution effect.
A product has utility if it:
B. satisfies consumer wants
The ‘law of diminishing marginal utility' states that:
C. beyond some point, additional units of a given product will yield less and less extra satisfaction to a consumer.
The first meat pie yields, for Craig, 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three meat pies is 38 units of utility. The marginal utility of the third meat pie:
