BADM 7200 -Final- Greg Upton LSU-
Questions and Answers.
a rule that describes a relationship between numbers - Answer a function!
-for each x, there is a unique y
-y=f(x)
-x= independent variable
-y= dependent variable
a linear function is in the form... - Answer y=bx+a
-a= intercept
-b= slope (rise/run)
True or False: At some point, the tangent line has the same slope as the function - Answer
True (MRS)
The complete list of all goods and services the consumer considers - Answer Consumption
bundle (X1 , X2)
Suppose a consumer wanted to purchase all of good 1. How much could she purchase? ... What
if she wanted to buy all of good 2? - Answer m/p1 ... m/p2
Suppose a consumer wants to increase consumption of good 1 by ΔX1. How much of good 2
would she have to give up? - Answer -p1/p2 (slope of the budget line)
The opportunity cost of consuming good 1 - Answer the slope of the budget line
The benefit that could have been enjoyed if the next best alternative was chosen - Answer
Opportunity Cost (opportunity cost of an MBA would be work experience, money, or a different
degree)
What is good 2 also known as? - Answer A composite good!
-representative of every other good
, -price is equal to $1
Let's say a household is given $200 in food stamps to add to their budget. It can only be spent
on food and not beer. What will happen to the budget line? - Answer Even though $200 can
only be spent on food, the consumer can buy more food and beer. This increases their budget.
Thus, the budget line will shift to the right.
We present preferences graphically as - Answer Indifference curves
Every consumption bundle you are indifferent between - Answer Indifference Cruve
Prove that indifference curves representing distinct preferences cannot intersect - Answer
We know that x ~ z and z~ y. The axium of transitivity implies that x ~ y, but this is not true
because x and y are not on the same indifference curve.
Any two bundles can be compared - Answer Complete preference
Any bundle is at least as good as itself - Answer Reflexive preference
Consumer is always willing to substitute one good for another at a constant rate - Answer
Perfect substitute
-I am indifferent between blue pens and black pens. I will always be willing to trade one for
another
-consumer will always choose the good with the lower price
Goods that are always consumed together in fixed proportions - Answer Perfect
compliments (left and right shoes)
A commodity that the consumer does not like - Answer bads (would rather have more
pepperoni and less anchovies)
A consumer does not care about the good one way or another - Answer Neutral good
(consumer only cares about pepperoni and is neutral to olives)
well behaved preferences are either - Answer monotonic or convex
A little more of any good increases utility - Answer Monotonic preference
Questions and Answers.
a rule that describes a relationship between numbers - Answer a function!
-for each x, there is a unique y
-y=f(x)
-x= independent variable
-y= dependent variable
a linear function is in the form... - Answer y=bx+a
-a= intercept
-b= slope (rise/run)
True or False: At some point, the tangent line has the same slope as the function - Answer
True (MRS)
The complete list of all goods and services the consumer considers - Answer Consumption
bundle (X1 , X2)
Suppose a consumer wanted to purchase all of good 1. How much could she purchase? ... What
if she wanted to buy all of good 2? - Answer m/p1 ... m/p2
Suppose a consumer wants to increase consumption of good 1 by ΔX1. How much of good 2
would she have to give up? - Answer -p1/p2 (slope of the budget line)
The opportunity cost of consuming good 1 - Answer the slope of the budget line
The benefit that could have been enjoyed if the next best alternative was chosen - Answer
Opportunity Cost (opportunity cost of an MBA would be work experience, money, or a different
degree)
What is good 2 also known as? - Answer A composite good!
-representative of every other good
, -price is equal to $1
Let's say a household is given $200 in food stamps to add to their budget. It can only be spent
on food and not beer. What will happen to the budget line? - Answer Even though $200 can
only be spent on food, the consumer can buy more food and beer. This increases their budget.
Thus, the budget line will shift to the right.
We present preferences graphically as - Answer Indifference curves
Every consumption bundle you are indifferent between - Answer Indifference Cruve
Prove that indifference curves representing distinct preferences cannot intersect - Answer
We know that x ~ z and z~ y. The axium of transitivity implies that x ~ y, but this is not true
because x and y are not on the same indifference curve.
Any two bundles can be compared - Answer Complete preference
Any bundle is at least as good as itself - Answer Reflexive preference
Consumer is always willing to substitute one good for another at a constant rate - Answer
Perfect substitute
-I am indifferent between blue pens and black pens. I will always be willing to trade one for
another
-consumer will always choose the good with the lower price
Goods that are always consumed together in fixed proportions - Answer Perfect
compliments (left and right shoes)
A commodity that the consumer does not like - Answer bads (would rather have more
pepperoni and less anchovies)
A consumer does not care about the good one way or another - Answer Neutral good
(consumer only cares about pepperoni and is neutral to olives)
well behaved preferences are either - Answer monotonic or convex
A little more of any good increases utility - Answer Monotonic preference
