Question

II True/False

11. (1 point) Income effects of a normal good must be positive.

12. (1 point) An decrease in price of a complement of good A shifts the demand curve of A to the right.

13. (1 point) An indifference curve of a person is a collection of all bundles that provide same level of satisfaction.

14. (1 point) If a consumer tries to maximize her utility, she must exhaust her budget.

15. (1 point) The axiom of diminishing marginal rate of substitution holds for any indifferent curves.

16. (1 point) If MUx > Px for a consumer, then she must purchases more x. MUy Py

17. (1 point) Substitution effects must be negative.

18. (1 point) The price effects of regular goods must be positive.

19. (1 point) A vertical demand curve is perfectly elastic.

20. (1 point) For a downward-slopping demand curve, the price elasticity of demand varies along the curve.

Answer 1

1 true

Income effect is positive of a normal good

When price falls of a normal good purchasing power increases thus more quantity demand

2 true

When price of a complement of good A falls them quantity demand of that good and good A will increase , shifting demand of good A

3 true

iC gives combination of goods which gives same level of satisfaction

4 true

To maximize utility consumer should be at a point where slope of IC is equal to budget line tht is MRS = Px/ Py

5 false

Diminishing MRS does not holds for every IC

6 true if MUx>Px then by purchasing more good x MUx will decline

7 true

Substitution effect means that when price of a good increase people will shift to it's substitutes having less price

8 true

Price effect of regular Or normal goods is positive

9 false

Vertical demand curve is perfectly inelastic

10 true

Downward sloping demand curve ,elasticity is different t varying slopes