5 Comparative Statics and Demand Online Quiz Questions

Holding prices fixed, an increase in a consumer’s income shifts the budget line outward in parallel.

In the Slutsky method, compensation after a price change is set to guarantee that the consumer can still reach the original utility level.

What is the relationship between income and the chosen quantity of a good, holding prices fixed, called?

At an interior optimum, what is $\mathrm{MRS}_{12}$ when $p_1=3$ and $p_2=6$?

A consumer’s income and $p_2$ stay fixed while $p_1$ rises. Around which point does the budget line rotate?

A normal good’s own price rises, with other conditions held fixed. Select all statements that correctly describe the effects on its demand.

A consumer’s income, preferences, and the price of good 2 stay fixed, but the price of good 1 changes. How does the consumer’s choice for good 1 appear on that consumer’s individual demand curve?

A consumer initially has income $m=100$, chooses $x=25$ units, and faces $p_x=2$. If $p_x$ rises to $4$, what compensated income lets the consumer still afford the original bundle? Enter the income amount in the same monetary units as $m$.

For utility $u(x,y)=xy$, a consumer has income $m=100$ and prices $p_x=4$, $p_y=5$. Using the optimal choice formula $x=m/(2p_x)$, how many units of $x$ does the consumer choose?

For the Slutsky equation $\frac{\partial x_i(p,m)}{\partial p_j}=\frac{\partial h_i(p,u)}{\partial p_j}-x_j(p,m)\frac{\partial x_i(p,m)}{\partial m}$, select all correct interpretations of its terms.

A consumer’s quantity of $x$ is initially $25$. After an own-price increase, the Slutsky-compensated choice is $18.75$, and the actual choice at the new prices and original income is $12.5$. Calculate the substitution effect and income effect on $x$, and show how they sum to the total change.

If a consumer's income rises while both prices remain unchanged, how does the budget line change?

What is the standard term for the relationship between a good's chosen quantity and income, holding prices fixed?

For a consumer's individual demand for good 1, what happens when only the price of good 1 varies?

If the price of good 1 rises while income and the price of good 2 stay fixed, how does the budget line change?

True or false: In the Slutsky method, compensated income after a price change is adjusted to preserve the consumer's original utility level.

At an interior optimum for two goods, which condition relates the marginal rate of substitution to prices?

A consumer has utility $u(x,y)=xy$, income $m=120$, and prices $p_x=3$ and $p_y=4$. At the optimum, what quantity of good $x$ does the consumer choose?