Practice Changes In The Budget Set (2.2.2) - Theory of Consumer Behaviour

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6 sample questions

Question 1.
What is the budget set?
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Think about the combinations of goods within the limits of one’s income.
Question 2.
If income increases, what happens to the budget line?
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Consider what happens when you have more money to spend.
3Question 3.
What does the budget line represent?
- All possible consumption bundles
- Total income
- Only one good
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Think about what it shows in a graphical representation.
4Question 4.
If the price of a good increases, how does the budget line change?
- True
- False
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Consider how a price change affects your choices.
Question 5.
A consumer has an income of $200, with the prices of goods A and B as $10 and $20 respectively. If the price of A drops to $5, what is the new budget set?
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Use the budget constraint formula.
Question 6.
Discuss the impact on the consumer's budget set if the income drops drastically. Provide examples of how consumption choices might change.
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Consider consumer behavior during financial struggles.

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