Indifference Curves and Budget Lines
101 questions· page 1 of 11
Which statement about the downward sloping demand curve of an inferior good is correct?
Options
A Negative income effect and substitution effect move in opposite directions, leading to a steeper demand curve.
B Negative income effect and substitution effect move in the same direction, leading to a flatter demand curve.
C Positive income effect and substitution effect move in opposite directions, leading to a steeper demand curve.
D Positive income effect and substitution effect move in the same direction, leading to a flatter demand curve.
What would not affect the budget line of an individual consumer?
Options
A the individual’s preference for various goods
B the level of income tax
C the money prices of goods
D the incomes earned by the individual
The diagram shows budget lines for an individual consumer.
What could explain the shift in the budget line from QR to ST?
Options
A a decrease in the consumer’s real income
B a decrease in the quality of both goods
C an increase in the consumer’s money income
D an increase in the price of both goods
What would not affect the budget line of an individual consumer?
Options
A the individual's preference for various goods
B the level of income tax
C the money prices of goods
D the incomes earned by the individual
The diagram shows a consumer’s indifference curve (I1) for two goods, X and Y.
The consumer moves from point M to point N.
What happens to the consumer’s marginal utility and total utility as a result of this move?
Options
| marginal utility from good X | marginal utility from good Y | total utility | |
|---|---|---|---|
| A | decreases | increases | increases |
| B | decreases | decreases | unchanged |
| C | increases | decreases | unchanged |
| D | increases | unchanged | decreases |
The diagram shows a consumer's budget line.
What determines the slope of the budget line?
Options
A the marginal rate of substitution of good X for good Y
B the price of good X multiplied by the price of good Y
C the ratio of the price of good X to the income of the consumer
D the ratio of the price of good X to the price of good Y
The diagram shows two indifference curves.
What do indifference curves indicate?
Options
A Consumers get more satisfaction on curve I1 from consuming more of X and less of Y.
B Consumers get more satisfaction on curve I2 from consuming less of X and more of Y.
C Each point on the curve represents the marginal rate of substitution of good X for good Y.
D Movement from I1 to I2 cannot be made unless the indifference curves cross.
What does an indifference curve show?
Options
A the amount of two products achievable with given income and prices
B the different combinations of two goods that give a consumer equal utility
C the income available to buy the two goods
D the rate at which marginal utility changes as consumption changes
The diagram shows indifference curves I1, I2 and a budget line T.
Which combination of X and Y gives the consumer maximum satisfaction?
Options
| units of X | units of Y | |
|---|---|---|
| A | 100 | 0 |
| B | 70 | 15 |
| C | 50 | 25 |
| D | 20 | 40 |
A consumer has $100 to spend on two products, X and Y.
The budget line shows the different possible combinations of products X and Y that can be purchased when all the consumer’s income is spent.
If the price of product Y increases to $10, what will be the maximum number of units of product X and product Y that the consumer can now purchase?
Options
| product X | product Y | |
|---|---|---|
| A | 5 | 10 |
| B | 5 | 20 |
| C | 10 | 10 |
| D | 20 | 10 |