An increase in the price of a good leads to
a) a decrease in the marginal utility per dollar of that good, and an increase in the quantity purchased.
b) a decrease in the marginal utility per dollar of that good, and thus a decrease in the quantity purchased.
c) an increase in the marginal utility per dollar of that good, and a decrease in the quantity purchased.
d) an increase in the marginal utility per dollar of that good, and thus an increase in the quantity purchased.
The consumption bundle that maximizes utility for a consumer is the bundle that
a) maximizes marginal utility across all goods.
b) minimizes the costs of production.
c) maximizes the marginal rate of substitution.
d) equates the slope of the budget constraint with the slope of the indifference curve.
When the price of a good changes, ______ influence(s) the change in consumption.
A) the income effect alone
B) neither the income effect nor the substitution effect
C) the substitution effect alone
D) both the income effect and the substitution effect
The ______ is the change in consumption caused by a change in relative prices holding the consumer's utility level constant.
a) budget constraint
b) substitution effect
c) indifference curve
d) income effect
The ______ is the change in consumption caused by a change in purchasing power from a price change.
a) substitution effect
b) indifference curve
c) income effect
d) budget constraint