Quiz 4- 2/23/2025

Question 1

What are substitutes? (3)

Answer 1

2 goods that are similar and give the same level of satisfaction.

2 goods for which the marginal rate of substitution of one for the other is constant.

The indifference curves are STRAIGHT LINES.

Question 2

What are Perfect compliments? (3)

Answer 2

2 goods that MUST come together for it to give a level of satisfaction.

2 goods for which the MRS is zero or infinite; the indifference cures are shaped as right angles.

Question 3

budget constraints

Answer 3

limitations/constraints that consumers face as a result of limited income.

Question 4

budget line

Answer 4

all combination of goods for which the total amount of money spent is equal to income.

Question 5

income changes

Answer 5

a change in income (unchanged prices) causes the budget line to shift parallel to the original line.

Question 6

Price effect

Answer 6

a change in price (with income unchanged) causes the budget line to rotate about one intercept.

Question 7

Consumer choice- the maximizing market basket must satisfy 2 conditions..

Answer 7

1. it must be located on the budget line
2. it must give the consumer the most preferred combination of goods & services.

Question 8

optimum

Answer 8

the point at which the indifference curve and the budget constraint touch.
(represents the best combination available for the consumer.)