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Lesson 6 Key Concepts
Terms in this set (10)
Refer to the above table. The one who likes the good the most is?
Uncertain since we cannot compare utility across people.
When marginal utility is positive, but decreasing, then total utility is?
Increasing at a decreasing rate
Using the above table, what is the total utility of consuming 3 bottles of soda?
Refer to the above table. Assume the consumer spends his entire income. If the consumer's optimum at the current price of a movie is at 4 hamburgers and 4 movies, and the price of a hamburger is $1, what is the consumer's income?
$20 ($4 for 4 hamburgers * 4 movies = $16 + $4 for burgers)
Refer to the above table. If the price of a hamburger is $2, the price of a Broadway Show is $60, and the consumer has $190, what is the consumer optimum?
5 Hamburgers and 3 Broadway shows.
The price of hamburgers is $2 and the price of movies is $4. The consumer has $14 of income. The consumer is purchasing 3 hamburgers and receiving 20 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goods
is an optimum since the entire income is spend and the marginal utility per dollar spend is the same for the last unit of each good.
Based on the information in the above table, the price of A is $3, the price of B is $2, and the price of C is $5. If Mary has $22 to spend, what combination of products A, B, and C should she buy in order to maximize her satisfaction?
2 units of A, 3 units of B, and 2 units of C
Refer to the above figure. All of the following are true concerning the diamond-water paradox except
Since the price of diamonds is high, demand is great.
For most goods, the real-income effect of a price change is
Small because the good accounts for a small part of the consumer's budget
The negative relationship between the quantity demanded of a commodity and its price can be explained by the principle of
Diminishing marginal utility
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