Question 1

Hector has $1,000 a month to spend on clothing (c) and food (f). The price of clothing is $50 and the price of food is $20. What is the equation for Hector's budget constraint?

Accepted Answer

Hector's budget constraint can be represented by the equation:
$50 × Clothing + $20 × Food = $1,000
This equation shows the total amount Hector can spend on clothing and food, given his budget of $1,000 a month. Choosing any combination of clothing and food that satisfies this equation would be within Hector's budget constraint.

Question 2

Refer to the information provided in Figure 6.7 below to answer the question(s) that follow.  Figure 6.7
-Refer to Figure 6.7. Along budget constraint AB, the price of good X is $25 and the price of good Y is $18. If the price of Y decreases to $14, the budget constraint will

Accepted Answer

When the price of good Y decreases, the consumer can afford more of good Y for the same amount of money, assuming income and the price of good X remain constant. This change causes the budget constraint to pivot outwards at point A (where no Y and maximum X is consumed) because the consumer can now purchase more of good Y with the same budget, increasing the slope of the budget line.

Question 3

Darius has $1,200 a month to spend on clothing (c) and food (f). The price of clothing is $60 and the price of food is $10. What is the equation for Darius's budget constraint, assuming he spends his entire budget?

Accepted Answer

Darius's budget constraint is represented by the equation $60c + $10f = $1,200, where he spends his entire budget on clothing and food.

Question 4

Hector has $2,000 a month to spend on clothing and food. The price of clothing is $50 and the price of food is 20. The clothing and food pairs in Hector's choice set include ________ units of clothing and ________ units of food.

Accepted Answer

The answer of Hector has $2,000 a month to spend...

Question 5

Refer to the information provided in Figure 6.7 below to answer the question(s) that follow.  Figure 6.7
-Refer to Figure 6.7. Along budget constraint AB, the price of good X is $10 and the price of good Y is $12. If the price of X increases to $15, the budget constraint will

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 6

Income increases cause no change in a household's choice set.

Accepted Answer

An increase in income can expand a household's choice set, as it can afford to purchase goods or services that were previously too expensive.

Question 7

Hector has $2,000 a month to spend on clothing and food. The price of clothing is $50 and the price of food is $20. Hector spends his entire income when he purchases ________ units of clothing and ________ units of food.

Accepted Answer

Let's set up some equations. 
Let x = number of units of clothing Hector purchases 
and y = number of units of food he purchases. 
We know that he spends his entire income of $2,000, so: 
50x + 20y = 2000 
Simplifying this equation, we can divide both sides by 10: 
5x + 2y = 200 
We also know that he can only purchase whole units of clothing and food, so x and y must be integers. 
We can use trial and error to see which combination of x and y satisfies this equation while also not exceeding $2,000. 
For example: 
If x=1, y=95 which is too much since the total spent would be $2,050. 
If x=2, y=90 which is too much since the total spent would be $2,040. 
If x=3, y=85 which is too much since the total spent would be $2,030. 
If x=4, y=80 which is too much since the total spent would be $2,020. 
If x=5, y=75 which is too much since the total spent would be $2,010. 
If x=6, y=70 which is too much since the total spent would be $2,000 (just right since Hector spends all his income on clothing and food) 
Therefore, Hector purchases 6 units of clothing and 70 units of food.

Question 8

Sonia has $2,400 a month to spend on clothing and food. The price of clothing is $60 and the price of food is $10. The clothing and food pairs in Sonia's choice set include ________ units of clothing and ________ units of food.

Accepted Answer

The answer of Sonia has $2,400 a month to spend...

Question 9

Price increases will ________ a household's choice set.

Accepted Answer

Price increases will decrease a household's choice set as they will have to reconsider their budget and may have to eliminate certain options that are now too expensive.

Question 10

If a household's income is cut in half, its budget constraint will

Accepted Answer

If a household's income is cut in half, the maximum amount they can spend on all goods and services will also be cut in half. This means that the budget constraint will shift in parallel to the old one, with the slope remaining the same.

Question 11

When the price of a good increases, the budget constraint does not change.

Accepted Answer

When the price of a good increases, the budget constraint shifts inward, as the consumer is now able to purchase less of that good with their income. This results in a steeper budget constraint with a lower intercept on the quantity axis. Conversely, if the price of a good decreases, the budget constraint shifts outward.

Question 12

Carlos can buy either sushi or eggrolls. If the prices of sushi and eggrolls triple and Carlos's money income doubles, we can deduce that Carlos's budget constraint will

Accepted Answer

If the prices of sushi and eggrolls triple, it means that Carlos can only buy one-third of what he used to buy with the same amount of money. On the other hand, if Carlos's money income doubles, he can afford to buy twice as much as before. Therefore, his budget line will still be linear with the same slope (opportunity cost) but it will shift inwards because he can afford fewer units of both sushi and eggrolls.

Question 13

If a household's income rises by 30%, its budget constraint will

Accepted Answer

A budget constraint represents the combination of goods and services a consumer can purchase with a given income. If a household's income rises, the budget constraint shifts outward parallel to the old one, indicating that the household can now afford more of both goods. This is because the increase in income increases the maximum amount of goods and services the household can purchase without changing the relative prices of those goods and services.

Question 14

A car's real cost is its opportunity cost. Opportunity cost is determined by

Accepted Answer

The opportunity cost of a car is determined by the relative prices of other goods or services that could have been purchased instead of the car. This includes things like housing, vacations, education, or investments that could have been made with the money spent on the car. Therefore, the best choice is B - relative prices.

Question 15

Carlos can buy either sushi or eggrolls. If the prices of sushi and eggrolls triple and so does Carlos's money income, we can deduce that Carlos's budget constraint will

Accepted Answer

When both the prices of goods (sushi and eggrolls) and Carlos's money income triple, the relative price of the goods (the ratio of the price of sushi to the price of eggrolls) remains the same, and Carlos's ability to purchase these goods in terms of quantity also remains unchanged. Therefore, his budget constraint, which represents the combination of goods he can purchase, will remain unchanged.

Question 16

Homogeneous products are distinguishable from each other.

Accepted Answer

Homogeneous products are identical or essentially the same, making them indistinguishable from each other. This is the opposite of heterogeneous products, which have distinguishable differences between them.

Question 17

When the price of a good decreases, the budget constraint shifts out parallel to the original budget constraint.

Accepted Answer

When the price of a good decreases, the budget constraint rotates outwards, making more of that good affordable, not shifting parallel.

Question 18

Assuming a perfectly competitive market implies that households have perfect knowledge of qualities and prices of everything available in the market.

Accepted Answer

In a perfectly competitive market, all firms sell homogeneous products and information is readily available to consumers. Therefore, households have perfect knowledge of qualities and prices of everything available in the market.

Question 19

Price increases cause a decrease in a household's choice set.

Accepted Answer

When prices increase, households have to either reduce their consumption of certain goods or find cheaper alternatives, which leads to a decrease in their choice set.

Question 20

Price decreases will ________ a household's choice set.

Accepted Answer

Price decreases will increase a household's choice set as it makes more goods and services affordable and accessible to them.

Quiz 6: Household Behavior and Consumer Choice

Hector has $1,000 a month to spend on clothing (c) and food (f) . The price of clothing is $50 and the price of food is $20. What is the equation for Hector's budget constraint?

Refer to the information provided in Figure 6.7 below to answer the question(s) that follow. Figure 6.7 -Refer to Figure 6.7. Along budget constraint AB, the price of good X is $25 and the price of good Y is $18. If the price of Y decreases to $14, the budget constraint will

Darius has $1,200 a month to spend on clothing (c) and food (f) . The price of clothing is $60 and the price of food is $10. What is the equation for Darius's budget constraint, assuming he spends his entire budget?

Hector has $2,000 a month to spend on clothing and food. The price of clothing is $50 and the price of food is 20. The clothing and food pairs in Hector's choice set include units of clothing and units of food.

Refer to the information provided in Figure 6.7 below to answer the question(s) that follow. Figure 6.7 -Refer to Figure 6.7. Along budget constraint AB, the price of good X is $10 and the price of good Y is $12. If the price of X increases to $15, the budget constraint will