The total utility of any commodity bundle: should be the same for all individual
ID: 1251038 • Letter: T
Question
The total utility of any commodity bundle: should be the same for all individuals. is defined as the maximum amount of money that a consumer will spend for the bundle. will be equal to expenditure on the commodity in question. is not likely to change even if a consumer's income changes. The law of diminishing marginal utility: implies that total utility declines as a consumer buys more of any good. is an important psychological premise that helps to explain why all demand curves have a negative slope. must hold for every commodity and every individual. says that increments to total utility will decrease as an individual consumes more of the commodity in question. Following the increase in income: a consumer's indifference curve will shift. the slope of the budget line will increase. individual commodity demand curves will not shift the budget line will shift in a parallel fashion. The absolute value of the slope of an indifference curve: is constant if the indifference curve is convex to the origin. is always equal to the slope of the budget line. decrease as we slide down the indifference curve. Indifference curve analysis of the choice between two commodities shown that an increase in the price of one commodity will: change the slope of the budget line. lead a consumer to choose a new commodity bundle, but one that is on the same indifference curve. shift consumer preferences. necessarily lead to a reduction in the demand for both commodities. There are two points on the demand curve for volley balls, as shown in the Table 1, below: What is the elasticity of demand between these two points?. 2.5. 2.0. 0.5. 0.4. none of the above. A technological breakthrough lowers the cost of photocopiers. If the demand for photocopiers is price inelastic, we predict that photocopier sales will: fall and total revenue will rise. fall and total revenue will fall. rise and total revenue will rise. rise and total revenue will fall. rise but changes in total revenue will depend on elasticity of supply.Explanation / Answer
30. D is correct. Changing a person's income may change the the bundle he or she chooses, but it will not change the total utility of that bundle. 31. D is correct by definition 32. D is correct. The budget line will shift out and maintain the same slope. 33. C is correct. Indifference curves are convex. 34. A is correct. Changing a price changes the slope and intercept of the budget line. 35. E = dQ/dP * P/Q, where P and Q are midpoints. E = (10/2)*(20/50) E = 2 The answer is B. 36. Lowering the cost of photocopiers is an increase in supply. This decreases price and increases quantity. If the demand is inelastic, that implies that the percentage increase in quantity will be lower than the percentage decrease in price. As a result, total revenue will lower. R = QP, Q and P both affect R the same way. So a bigger decrease in P than the increase in Q results in an overall decrease in R. Sales will increase and revenue will fall. D is the correct answer.
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