Marginal Utility

Topics: Consumer theory, Indifference curve, Utility Pages: 3 (544 words) Published: November 6, 2010
If marginal utility is negative, we can infer that Question 1 answers | | total utility is increasing by smaller and smaller amounts | | | total utility has fallen |

| | total utility is also negative / |
| | the product is an inferior good |

A utility-maximising consumer changes their expenditures until Question 2 answers | | MUX = MUY for all pairs of goods / |
| | TUX/PX = TUY/PY for all pairs of goods / | | | MUX/MUY = PX/PY for all pairs of goods/ | | | PX (MUX) = PY(MUY) for all pairs of goods |

The difference between the maximum amount a person is willing to pay for a good and its current market price is known as Question 4 answers | | consumer surplus / |
| | the substitution effect |
| | profits |
| | marginal utility |
/

Which of the following is NOT a property of an indifference curve? Question 5 answers | | An indifference curve is convex to the origin / | | | The consumer is indifferent between any two points on an indifference curve / | | | The marginal rate of substitution diminishes as you move down the indifference curve | / | | As you move from one indifference curve to another indifference curve closer to the origin, utility increases |

An indifference curve is Question 6 answers
| | the set of all points of consumer equilibrium as the consumer’s income changes / | | | the set of all goods that the consumer can afford given her income and the prices of the goods / | | | all combinations of goods X and Y that yield the same total utility / | | | all combinations of goods X and Y that yield the same marginal utilit |

As long as indifference curves are convex to the origin, utility maximisation will take place Question 7...
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