date: 22-02-2100 ASSIGNMENT # 1 STUDENT’S NAME : Devon Rachae SECTION 1 Multiple Choice Questions 1. The theory of consumer behavior is based on certain assumptions. It includes at least the assumption(s) that preferences are: a. complete. b. transitive. c. intransitive. d. both (a) and (b) are correct. e. both (a) and (c) are correct. 2. A consumer prefers market basket A to market basket B‚ and prefers market basket B to market basket C. Therefore‚ A is preferred
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coffee. The student will buy a mix of coffee and tea. T F (The student will buy only coffee) T F In economic theory‚ the demand for a good must depend only on income and its own price and not on the prices of other goods. T F If two goods are substitutes‚ then an increase in the price of one of them will increase the demand for the other. 1 T F If consumers spend all of their income‚ it is impossible for all goods to be inferior goods. A good is a luxury good if the income
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goods or services where consumers do not experience diminishing marginal utility? Explain? (4 marks) 2. The table below shows the quantity and total utility obtained from consumption of good X. Fill in the blanks for marginal utility. (4 marks) Quantity | Total Utility | Marginal Utility | 1 | 40 | | 2 | 75 | | 3 | 105 | | 4 | 130 | | 5 | 150 | | (b) If price per unit of X is RM25‚ calculate the quantity of X that will maximise the utility of this consumer? (4 marks) 3. How
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Advanced Microeconomic Theory Thomas Herzfeld September 2010 Contents 1 Mathematical Appendix 1.1 Chapter A1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 Chapter A2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Consumer Theory 2.1 Preferences and Utility . . . . . . 2.2 The Consumer’s Problem . . . . . 2.3 Indirect Utility and Expenditure . 2.4 Properties of Consumer Demand 2.5 Equilibrium and Welfare . . . . . 3 Producer Theory 3.1 Production . .
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demand (PED) is an elasticity that measures the nature and degree of the relationship between changes in quantity demanded of a good and changes in its price. Introduction When the price of a good falls‚ the quantity consumers demand of the good typically rises; if it costs less‚ consumers buy more. Price elasticity of demand measures the responsiveness of a change in quantity demanded for a good or service to a change in price. Mathematically‚ the PED is the ratio of the relative (or percent) change
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2nd part: Microeconomic Analysis Under the Pure Competition Assumption Chap 3-The Theory of Consumer Choice (stiglitz chap 5) Section 1) Preferences: What the Consumer Wants A/ The consumer preferences * Utility= the level of happiness or satisfaction that a person receives from the consumption of goods and services. Utility is a measure of well-being * Focus on 2 goods X and Y * Cardinal/Ordinal measurements related economics problem. cardinal: a variable is cardinally measurable
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QUESTIONS FOR PRACTICE AND REVIEW TOPIC 2 – THEORY OF CONSUMER BEHAVIOR 1) The price of DVDs (D) is Rs 200 and the price of CDs (C ) is Rs 100. Ajay has a budget of Rs 1000 to spend on the two goods. Suppose that he has already bought one DVD and one CD. In addition‚ there are 3 more DVDs and 5 more CDs that he would really like to buy. a. Given the above prices and income‚ draw his budget line on a graph with CDs on the horizontal axis. b. Considering what he has already purchased and what he
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Unit 1: Consumer Theory Tutorial Set 1 PREFERENCES 1. A basic assumption about consumers in microeconomics is that they have preferences over different baskets of goods. Explain the concepts: “preference”‚ ‘preference order”‚ and “basket of goods”. 2. a) If there are only two goods‚ it is possible to illustrate a consumer’s preferences over them with an indifference map. Draw an indifference map with three indifference curves. b)There are a few standard assumptions about what an indifference
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Preliminary Lecture notes for a Micro Course Based on Microeconomics 8ed by Pindyck & Rubinfeld Prepared by Houston H. Stokes. Goal of the Notes: Allow the student to have an outline of the key ideas and solutions to a number of problems that will be discussed in class. Since the notes are distributed in WORD® format‚ students can edit the notes. Introduction Quote from Robert Mundell Man and Economics 1968 "Economics is the science of choice. It began with Aristotle
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to accurately be compared between individuals‚ there would need to be common ground. Common background and opportunities would have to be consistent between all people. 2. Why is the utility theory applied to consumer choice theory silent about comparing people’s utility levels? The utility theory is silent because utility levels cannot be compared. The utility level of any person can be multiplied by any number without personal preferences changing; therefore‚ the utilities of different people
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