18 Questions
What does a negative slope of an indifference curve indicate?
As less of one commodity is consumed, more of the other commodity must be consumed to maintain utility.
Why do indifference curves never intersect?
Intersecting indifference curves represent different levels of utility.
How is the law of diminishing marginal rate of substitution confirmed?
By inspecting Figure 4.6 and observing the trend in utility levels.
What is violated if an indifference curve touches either axis?
The assumption that consumers buy two goods in combinations.
In the context of indifference curves, why is intersecting not allowed?
Intersecting curves represent conflicting levels of satisfaction.
What happens if two indifference curves intersect at a point?
The consumer would be indifferent between different levels of utility.
What concept explains the decrease in the rate at which a consumer is willing to substitute one good for another?
Law of diminishing marginal utility
In consumer theory, which of the following is a fundamental assumption related to consumer preferences?
Rational choice theory
Why is the law of diminishing marginal rate of commodity substitution important in consumer choice theory?
It explains the negative slope of indifference curves
What concept in economics is directly related to the idea that consumers will always prefer more goods to less given their income and prices?
Consumer rationality
In consumer theory, what does the axiom of transitivity imply about consumer preferences?
Preferences are complete and consistent
How does the law of diminishing marginal rate of commodity substitution impact consumer utility?
It reduces the rate at which consumers trade one good for another
What does the law of diminishing marginal rate of commodity substitution state?
As a consumer gives up more of one good, the willingness to give up a unit of another good decreases.
What is the relationship between the marginal rate of transformation (MRT) and the opportunity cost of producing goods?
MRT measures the opportunity cost of producing goods.
How is economic growth represented on a production possibilities curve (PPC)?
By an outward shift in the PPC.
On an indifference curve, what does the law of diminishing marginal rate of commodity substitution imply?
Consumers are less willing to give up one good for another as they have more of the former.
How does the opportunity cost change when moving from output X to output Y on a PPC?
The opportunity cost is obtained as MRTbr = 0.
In Figure 1.3, what does the outward shift in the production possibilities curve (PPC) represent?
Economic growth leading to increased production capacity.
Learn about the concept of opportunity cost represented by the slope of the PPC and how economic growth is depicted by an outward shift in the production possibilities curve. Explore the measurement of opportunity cost and the factors influencing economic growth.
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