1. Jim recently graduated from college and found his first job. He noticed that
ID: 1219850 • Letter: 1
Question
1. Jim recently graduated from college and found his first job. He noticed that when he was in college he often ate macaroni and cheese, but now he does not. What might explain this?
The substitution effect works in the same direction of the income effect
The substitution effect works in the opposite direction of the income effect
There is no income effect for Jim’s demand for macaroni and cheese.
The income effect works in the opposite direction of the substitution effect
2. If an indifference curve was a straight line, what might we know about the marginal utility (MU) of the two goods?
Nothing
The MU is increasing
The MU is constant
the MU is decreasing
3. If the price of a good on the horizontal axis increases, typically we would expect:
The budget line to shift in parallel to the original budget line and the consumer consumers less of both goods
The budget line to shift out parallel to the original budget line and the consumer consumers more of both goods
The budget line pivots inward and the consumer consumers less of both goods
The budget line pivots outward and the consumer consumers more of both goods
a.The substitution effect works in the same direction of the income effect
b.The substitution effect works in the opposite direction of the income effect
c.There is no income effect for Jim’s demand for macaroni and cheese.
d.The income effect works in the opposite direction of the substitution effect
Explanation / Answer
1
b and d
2.
c
constant
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