Topic 4: consumer choice

Question 1

Where does the optimal consumption choice take place

Answer 1

Where the budget line and indifference curve are at a tangency point
The highest level of utility is provided here

Question 2

What happens when incomes falls to the consumption of:
- normal goods
- inferior goods

Answer 2

Normal goods decrease
inferior goods increases

Question 3

what happens to the budget line constraint after a change in income

Answer 3

a shift in the budget kine constraint and therefore a change in the feasible set

Question 4

what happens if there is a change in budget to the budget line

Answer 4

shifts but stays parallel as long as prices remain constant

Question 5

What is constrained optimisation

Answer 5

the choice of one variable affecting the amount of another variable that can reused

Question 6

What does parallel indifference curves show

Answer 6

Same preferences

Question 7

What does a pivot in the