ECN 201 CBT Practice

1. Two indifference curves cannot __________ because it would lead to a logical contradiction regarding the level of satisfaction provided by a single bundle of goods.

2. In a graph of an indifference curve, the vertical axis and horizontal axis typically represent the __________ of two different commodities.

3. The Marginal Rate of Substitution (MRS) typically __________ as a consumer moves down an indifference curve, giving up more of one good for another.

4. The assumption of __________ states that for any two bundles A and B, a consumer can always rank them as A being at least as good as B, B being at least as good as A, or both.

5. An indifference curve is defined as a(n) __________ of all combinations of two goods that yield the same level of satisfaction to the consumer.

6. If an indifference curve were a straight line, it would indicate that the two goods are __________ substitutes for the consumer.

7. A curve that represents all bundles of goods that provide the consumer with the same level of satisfaction is called a(n) __________ curve.

8. When the price of a good falls, its __________ increases because the consumer can now buy more goods with the same amount of money.

9. For a(n) __________ good, an increase in real income leads to a decrease in the quantity demanded.

10. The convexity of an indifference curve to the origin is a result of the principle of __________ marginal rate of substitution.

11. The Marginal Rate of Substitution (MRS) is mathematically represented as the negative __________ of the indifference curve at any given point.

12. The assumption of __________ states that if a consumer prefers bundle A to B and bundle B to C, then the consumer must prefer bundle A to C.

13. A consumer reaches equilibrium at the point where the budget line is __________ to the indifference curve

14. In welfare economics, indifference curves are used to help measure changes in consumer __________.

15. The __________ effect occurs when a consumer replaces a relatively expensive good with a cheaper one while keeping real purchasing power constant.

16. A set of indifference curves drawn together on a single graph to show different levels of consumer satisfaction is called an indifference __________.

17. At the point of consumer equilibrium, the Marginal Rate of Substitution (MRS) is equal to the __________ of the two goods.

18. Two indifference curves can never __________ because it would violate the assumption of transitivity and monotonicity.

19. The indifference curve approach is also known as the __________ approach to utility, as it ranks satisfaction rather than measuring it in units.

20. According to the principle of monotonicity, if bundle A contains more of at least one good and no less of others than bundle B, then bundle A is __________ than bundle B.

21. The rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility is known as the __________ Rate of Substitution.

22. A situation where a consumer prefers bundle A to bundle B, and bundle B is not at least as good as bundle A, is known as a __________ preference.

23. Indifference curves for goods that must be used together in fixed proportions, such as a left shoe and a right shoe, are __________ in shape.

24. An indifference curve for __________ substitutes is represented by a straight line with a constant slope.

25. The additional satisfaction gained from consuming one more unit of a good, while keeping the consumption of other goods constant, is defined as __________ utility.

26. The downward slope of an indifference curve from left to right implies that the consumer must __________ the consumption of one good to obtain more of another while keeping utility constant.

27. A higher indifference curve represents a __________ level of utility compared to a lower indifference curve.

28. "Well-behaved" preferences are characterized by being monotonic and __________, meaning the consumer prefers averages to extremes.

29. A utility function that only indicates the order or rank of preferences without measuring the exact magnitude of satisfaction is classified as __________ utility.

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The total change in quantity demanded following a price change is the sum of the substitution effect and the __________ effect.

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