3. Consumer and Producer Theory

Consumer Choice — Quiz

Test your understanding of consumer choice with 5 practice questions.

Practice Questions

Question 1

A consumer's budget constraint is represented by the equation $P_X X + P_Y Y = I$. If the consumer's income ($I$) increases, what happens to the budget constraint?

Question 2

Consider a consumer who is maximizing utility. If the marginal utility of good A is 20 utils and its price is $4, while the marginal utility of good B is 25 utils and its price is $5, what action should the consumer take to increase total utility?

Question 3

The derivation of a consumer's demand curve from utility and budget constraints involves observing how the optimal quantity demanded of a good changes as which factor varies, while holding other factors constant?

Question 4

If a consumer's income increases, and as a result, they purchase more of a particular good, that good is generally considered a(n):

Question 5

When the price of a good decreases, consumers tend to substitute away from relatively more expensive goods towards the now relatively cheaper good. This describes the: