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Chapter 6: 3QQ (page 133)

At two points on an indifference curve,

a. the consumer has the same income.

b. the consumer has the same marginal rate of substitution.

c. the bundle of the goods cost the consumer the same amount.

d. the bundle of goods that yield the consumer same satisfaction.

Short Answer

Expert verified

The correct answer is option d) the bundle of goods that yield the consumer the same satisfaction.

Step by step solution

01

Explanation for the correct option (d)

The indifference curve shows the combination of two sets of commodities that give the same level of satisfaction to the consumers. So the option d is the suitable answer from the options. Along the indifference curve, the consumer has an equal preference over the set of goods.

02

Explanation of incorrect options

Reasons for the incorrect options are as follows:

  • The indifference curve focuses on the satisfaction of the consumer, and it doesn鈥檛 focus on income. So, option 鈥渁鈥� is incorrect.

  • The MRS in an indifference curve will be the slope of the curve at any point. The slope of the indifference curve measures the rate at which a consumer is willing to give up one good for another. It changes along the IC curve. So option 鈥渂鈥� is incorrect.

  • The indifference curve shows the point where the same level of utility or satisfaction is received, not the same cost. So option 鈥渃鈥� is incorrect.

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Most popular questions from this chapter

Show a consumer鈥檚 budget constraint and indifference curves for wine and cheese. Show the optimal consumption choice. If the price of wine is \(3 per glass and the price of cheese is \)6 per pound, what is the marginal rate of substitution at this optimum?

Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

a. Show the effect of the frost on Maya鈥檚 budget constraint.

b. Show the effect of the frost on Maya鈥檚 optimal consumption bundle, assuming that the substitution effect outweighs the income effect for croissants.

c. Show the effect of the frost on Maya鈥檚 optimal consumption bundle, assuming that the income effect outweighs the substitution effect for croissants.

1. Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a round-trip cost of \(2 in gasoline money. He has a total of \)10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points on Jeremy鈥檚 consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.

Explain all the reasons why a decrease in a product's price would lead to an increase in purchases

If Edma buys more pasta when the price of pasta increases, we can infer that for Edma

  1. pasta is a normal good when the income effect exceeds the substitution effect.

  2. pasta in a normal good for which the substitution effect exceeds the income effect.

  3. pasta is an inferior good when the income effect exceeds the substitution effect.

  4. pasta in an inferior good for which the substitution effect exceeds the income effect.
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