Question 1

If the price of a good increases, a consumer will substitute away from the relatively more expensive good, which will increase the marginal utility for that good and bring the consumer back to equilibrium.

Accepted Answer

The answer of If the price of a good increases,...

Question 2

Tom's marginal utility of Mountain Dew exceeds his marginal utility of crackers at his consumer equilibrium. Therefore, his consumer surplus from Mountain Dew must exceed his consumer surplus from crackers.

Accepted Answer

Consumer surplus is not directly determined by marginal utility at consumer equilibrium. It depends on the difference between what a consumer is willing to pay and what they actually pay, not just marginal utility.

Question 3

When Tom's income increases, his demand curve for Mountain Dew shifts rightward because the higher income increases his marginal utility of Mountain Dew.

Accepted Answer

An increase in income typically shifts the demand curve to the right due to increased purchasing power, not necessarily because of increased marginal utility.

Question 4

-Margo buys music CDs and movies on DVDs. The table above shows her total utility from each good.
a) Draw graphs showing Margo's utility from music CDs and from movies on DVDs.
b) Compare the two utility graphs. Describe Margo's preferences.
c) Draw graphs that show Margo's marginal utility from music CDs and from movies on DVDs.
d) What do the two marginal utility graphs tell you about Margo's preferences?

Accepted Answer

The answer of 
-Margo buys music CDs and movies on...

Question 5

The Paradox of Value is resolved by the willingness for an individual to pay a high price for a good or service that has a high marginal utility per dollar.

Accepted Answer

The answer of The Paradox of Value is resolved by...

Question 6

-Sarah spends $100 a year on magazines and ice cream. The table above shows her utility from each good. If the price of a magazine is $5 and the price of ice cream is $5 per gallon, how does Sarah spend the $100?

Accepted Answer

The answer of 
-Sarah spends $100 a year on magazines...

Quiz 8: Utility and Demand

If the price of a good increases, a consumer will substitute away from the relatively more expensive good, which will increase the marginal utility for that good and bring the consumer back to equilibrium.

Tom's marginal utility of Mountain Dew exceeds his marginal utility of crackers at his consumer equilibrium. Therefore, his consumer surplus from Mountain Dew must exceed his consumer surplus from crackers.

When Tom's income increases, his demand curve for Mountain Dew shifts rightward because the higher income increases his marginal utility of Mountain Dew.

The Paradox of Value is resolved by the willingness for an individual to pay a high price for a good or service that has a high marginal utility per dollar.

-Sarah spends $100 a year on magazines and ice cream. The table above shows her utility from each good. If the price of a magazine is $5 and the price of ice cream is $5 per gallon, how does Sarah spend the $100?