Consumer Preferences and Utility Maximization
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Questions and Answers

What do consumption possibilities tell us?

  • The consumer's income and expenditure on goods and services
  • The consumer's preferences for goods and services
  • The total amount of goods and services available in the market
  • What the consumer can afford to buy given a limited income and prices of goods and services (correct)

    • What is illustrated by the budget line?

  • The consumer's preferences for pizza and books
  • The total cost of all the goods and services
  • The limit of consumption possibilities (correct)
  • The total income of the consumer

    • How are affordable choices constrained by the budget line?

  • Only points inside the budget line are affordable
  • Points on the budget line and inside the budget line are affordable (correct)
  • Only points beyond the budget line are affordable
  • Points beyond the budget line are affordable

    • What happens to consumption possibilities when there is an increase in income?

    <p>Shifts the budget line rightward without changing its slope</p> Signup and view all the answers

    How does a change in the price of one of the goods affect consumption possibilities?

    <p>Changes the intercept on its axis and changes the slope of the budget line</p> Signup and view all the answers

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