Chapter Three

Question 0

Indifference curve

Answer 0

A collection if baskets, all of which the consumer considers equally desirable,

Question 1

Goods

Answer 1

Items of which the consumer would prefer to have more rather than less.

Question 2

Marginal value of X in terms of Y

Answer 2

The number of Ys for which the consumer would be just willing to trade one X.

Question 3

Convex

Answer 3

Bowed in toward the origin.

Question 4

Indifference curves slope downward, they fill the _________, they never ________ and they are _________.

Answer 4

Plane. Cross. Convex

Question 5

Composite good convention

Answer 5

The lumping together of all goods but one into a single portmanteau good.

Question 6

Budget line

Answer 6

The set of all baskets that the consumer can afford, given prices and his or her income,

Question 7

Optimum. Pl. optima.

Answer 7

The most preferred of t he baskets on the budget line.

Question 8

The bast the consumer chooses will always be located where his _________line is tangent to one if his ____________ curves

Answer 8

Budget. Indifference.

Question 9

Corner solution

Answer 9

An optimum occurring on one of the axes when there is no tangency between the budget line and an indifference curve.