micro quizz 2 - Eco09L1 Top of Form c1 The budget line _....

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Eco09L1 Top of Form c 1 The budget line ____________________________. shows the income a household needs to be able to buy goods and services defines the limits to a household's consumption illustrates a household's preferences defines a household's consumption when prices change c 2 Real income is ____________________. the maximum amount of goods and services that a household can afford equal to money income minus taxes equal to money income plus benefits minus taxes equal to the income earned legally c 3 The magnitude of the slope of the budget line is equal to the _______ or _______ of the good plotted on the _________ in terms of the other good. relative price; opportunity cost; x-axis relative price; total cost; y-axis relative price; marginal cost; y-axis price; opportunity cost; x-axis c 4 An indifference curve shows combinations of goods _______________________. which the consumer prefers equally that are inside or on the budget line that are affordable that have the same relative price c 5 The marginal rate of substitution is equal to the ________________________. magnitude of the slope of the indifference curve relative price marginal cost of each good slope of the budget line c 6 As a consumer moves down along an indifference curve, the consumer's marginal rate of substitution diminishes real income decreases marginal utility diminishes marginal returns diminish c 7 For goods and services that are perfect complements, the consumer's indifference curves are ____________ lines. L-shaped straight curved negatively sloped
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8 The price effect is the effect of __________ on the quantity of the good _______. a change in the price; consumed an increase in the price; consumed a change of the price; supplied a decrease in the price; demanded c 9 The effect of a change in income on the quantity of the good consumed is called the income effect budget effect substitution effect real income effect 10 The effect of a change in the price of a good or service on the quantities consumed when the consumer remains indifferent between the original and new combination of goods consumed is the _______________. substitution effect real income effect income effect price effect Eco09L2 Top of Form c 1 As Judy moves down along her budget line, ___________________________. her income and the relative prices of goods and services do not change the opportunity cost increases her income decreases but the relative prices of the goods and services do not change her income and the opportunity cost increase c 2 John has $40 to spend on books and running shoes. Books cost $20 each and running shoes are $40 a pair. John's real income ______________________. is 2 books or 1 pair of running shoes is 2 books plus 1 pair of running shoes depends only on his money wage is $40 c 3 If the price of peanuts and potato chips both increase by the same percentage, then the _______ of peanuts with respect to potato chips will ______________. price effect; not be an increase
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micro quizz 2 - Eco09L1 Top of Form c1 The budget line _....

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