Answer You are willing to give up more of good 2 for one unit of good 1 than wha

Question

Answer

You are willing to give up more of good 2 for one unit of good 1 than what the market prices require. You are willing to give up less of good 2 for one unit of good 1 than what the market prices require. You are currently at the optimal (best affordable) consumption bundle. You should increase the consumption of good 1 and decrease the consumption of good 2. Both B and D.

1. Suppose that you are currently consuming your optimal (best affordable) consumption bundle and both good 1 and good 2 are normal goods. If the price of good 1 (on the x-axis) decreases, the substitution effect would ________ your consumption of good 1 and the income effect would _________ your consumption of good 1. Answer increase; also increase decrease; also decrease increase; decrease decrease; increase
   When marginal utility is ______, total utility will be ________ as the consumer increases his consumption.   Answer
   increasing; increasing
   positive; increasing
   decreasing; decreasing
   both A and C

Explanation / Answer

1)

2)

3) both a and c

Both B and D.

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