Practice Deriving A Demand Curve From Indifference Curves And Budget Constraints (2.4.2)

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6 sample questions

Question 1.
What is a budget constraint?
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Think about what a consumer can afford.
Question 2.
What happens to demand when the price of a good decreases?
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Remember the law of demand!
3Question 3.
What happens to the demand curve when the price of a good increases?
- Increases
- Decreases
- Stays Constant
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Think about the relationship between price and quantity.
4Question 4.
Is the substitution effect positive or negative?
- True
- False
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Remember the consumer's reaction to price changes.
Question 5.
A consumer had a budget of $50. Price of bananas is $5, and mangoes are $2. How many of each can she buy if her preferences are equally aligned?
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Think about combinations that add up to the budget.
Question 6.
If a consumer's utility function shows that they prefer bananas to mangoes, what will happen to their demand if banana prices fall?
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Consider consumer preferences concerning price changes.

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