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Exercise 5: Consumer Choice
Terms in this set (15)
The relationship between an individual's consumption bundle and his or her utility is called a
The marginal utility of coffee consumption for Steve is the change in ________ generated by consuming an additional unit of coffee.
The principle of diminishing marginal utility states that as an individual consumes more of a good:
the addition to total utility obtained from the nth unit of the good will be less than that obtained from the (n - 1) unit of the good.
Economists identify the satisfaction a person derives from the consumption of goods and services as:
The amount by which total utility increases when an additional unit of a good is consumed is called ________ utility.
The utility of a good is determined by how much ________ a particular consumer obtains from it.
When total utility is at a maximum, marginal utility is:
The amount by which total utility rises when an additional unit of a good is consumed is called:
Marginal utility is best computed as the:
change in total utility from an additional unit consumed.
A consumer's spending is restricted because of:
a budget constraint
Suzy knows she has maximized her utility, because she is on her budget constraint and:
MUx/Px = MUy/Py
Jessica spends all her income on two goods, A and B. The price of A is $5, and the price of B is $7. At the current consumption bundle, the marginal utility of A is 10, and the marginal utility of B is 21. To maximize utility given her income, Jessica should:
increase her consumption of B and decrease her consumption of A.
If a consumer purchases a combination of commodities X and Y such that MUx/Px = 20 and MUy/Py = 10, to maximize utility, the consumer should buy:
more of X and less of Y.
The optimal consumption rule for all goods requires that:
the marginal utilities of all goods consumed divided by their respective prices are equal.
According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity of the product demanded because buyers:
purchase more of the now relatively less expensive good.
Recommended textbook explanations
Principles of Microeconomics
N. Gregory Mankiw
Epack: Principles Of Microeconomics Mindtap Economics Instant Access
N. Gregory Mankiw
Nancy Mitchell, William Wells
Essentials of Economics, EconPortal for Essentials of Economics (access card)
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