Question

The statements on the left are associated with the response on the right.Match them by placing the appropriate answer(s) in the space allotted and provide not more than 3 lines “reason(s) for your choice of answer(s)”. there should be proper reason with every answer.

NOTE: Any correct answer without a valid reason is zero.

A. The idea that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases is known as _________	the income effect only
If consumption of an extra unit of some good generates a marginal utility of zero, then consumption of that additional unit would mean that total utility would ___________	normal good
C. Suppose a consumer can purchase only two goods, soap and apples. If the price of soap falls and the consumption of apples increases, we can conclude that the increased consumption of apples is due to ______	not change.
D. Suppose there are only two goods, A and B, and that consumer income is constant. If the price of good A falls and the consumption of good B rises, we can conclude that ______	4. income and substitution effects
E. A demand curve for a normal good is downward sloping due to ____	5. it decreases
F. Assume you are consuming two goods, X and Y. X and Y are both normal goods but they are not close complements. The price of good X increases but the price of Y remains unchanged. However, you are given enough additional income to ensure that your utility remains unchanged. What happens to your consumption of good X? _____	6. increase
G. Consider the pizza market, with a downward-sloping demand curve and an upward-sloping supply curve. Suppose 100 pizzas are purchased at the free-market equilibrium price. The consumer surplus on the 100th pizza is _______	positive.
H. For Giffen Goods, a reduction in real income will lead household to _____ purchases of the goods	8. direct
I. Consumer surplus is a _____ consequences of negatively sloped demand curves	Diminishing marginal utility.
If total utility from the consumption of some product is increasing as more units are consumed, then marginal utility must be ______	10. Zero

Answer 1

A. The idea that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases is known as - Diminishing marginal utility.

As per law of diminishing marginal utility, increase in consumption of a good leads to increase in total utility but decrease in marginal utility. For eg, as we consume more of chocolates. our level of satisfaction for consequent units declines.

B. If consumption of an extra unit of some good generates a marginal utility of zero, then consumption of that additional unit would mean that total utility would - Not change. When marginal utitlity is zero, total utility is maximum and constant.

G. Consider the pizza market, with a downward-sloping demand curve and an upward-sloping supply curve. Suppose 100 pizzas are purchased at the free-market equilibrium price. The consumer surplus on the 100th pizza is - Zero. Consumer surplus is the difference between maximum willingness to pay of a consumer and the price he actually pays. At 100 unit, His maximum willingness to pay is same as price and thus CS is zero.

J. If total utility from the consumption of some product is increasing as more units are consumed, then marginal utility must be = Decreasing.

When TU increases, MU decreases. When TU is maximum, MU is zero. When TU decreases, MU becomes negative.