Utility Maximum 3

Question 1

At hat point does the marginal rate of substitution equal price ratio

Answer 1

Th point where the indifference curve touches the budget constraint

Question 2

What is the optimal consumption bundle

Answer 2

Where out indifference curve touches our budget of constraint

Question 3

Define the point of equilibrium

Answer 3

The marginal utility of 2 items ie pizza and coookies are equal.

Same level of satisfaction

Question 4

What happens if the points chosen are not the points of eqilibrium

Answer 4

Then the consumer would ideally give up some of the larger product to get an equal amount of the lesser product

Question 5

What is perverse demand

Answer 5

This is where when price goes up but we actually demand for of something

Question 6

Define ostentatious expenditure

Answer 6

When consumers buy a product they aren’t buying the product they are in turn buying the snob value, prestige value and exclusivity

Question 7

What are giffen goods

Answer 7

Cheap affordable goods consumers buy a lot of