10 Questions
What happens to the budget line when there is an increase in income?
It shifts to the right
What is the effect of an increase in the price of one good on the budget line?
It swivels the budget line
What is the point of contact between the consumer's budget line and the highest indifference curve?
Consumer equilibrium
What happens to the quantity demanded of each good when there is an increase in income?
It increases
What is the effect of a decrease in the price of one good on the budget line?
It shifts the budget line to the right
What is the slope of the budget line indicative of?
The relative prices of the goods
What happens to the purchasing power when the price of one good increases?
It decreases
What is the name of the curve that represents different combinations of two goods that provide the same level of satisfaction?
Indifference curve
What is the name of the rate at which the consumer is willing to trade one good for another?
Marginal rate of substitution
What is the law that states that the marginal rate of substitution will decrease as the quantity of one good increases?
Law of diminishing marginal substitution
This quiz covers the concept of Marginal Rate of Substitution in microeconomics, including how to calculate MRS and interpret its value. It involves scenarios of apple and orange trade-offs.
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