SOLVED

7.3Â Â The Individual Demand Curve 1) Ceteris paribus, if the prices of the goods a consumer purchases decrease, then the consumer’s real income: A) decreases. B) increases. C) remains the same. D) It is impossible to tell with the information presented. 2) A change in the price of a good purchased by a consumer would affect that consumer’s: A) nominal income. B) real income. C) demand curve. D) marginal utility. 3) Ceteris paribus, if the prices of the goods a consumer purchases increase, then the consumer’s real income: A) decreases. B) increases. C) remains the same. D) might increase or decrease. 4) Holding real income constant, the change in quantity consumed that is caused by a change in the relative price of the good describes the: A) law of diminishing returns. B) substitution effect. C) income effect. D) law of supply. 5) When a decrease in the price for wine increases Adam’s real income, Adam will buy more of all normal goods. If wine is a normal good, then Adam will buy more wine due to: A) law of demand. B) substitution effect. C) income effect. D) law of supply. 6) When the price of a good changes, the substitution effect and the income effect: A) work in the same direction. B) work in opposite directions. C) cause the demand curve to slope upward. D) are irrelevant. 7) A point on a demand curve shows the utility maximizing quantity at that price. 8) If a decrease in consumer prices and a decrease of consumer’s nominal income offset each other by the same amount, the consumer’s real income is not changed. 9) An individual demand curve shows the relationship between the price of a product and the quantity demanded by a rational consumer. 10) The income effect helps explain the shape of a consumer’s demand curve. 11) What does diminishing marginal utility imply about the shape of a person’s demand curve? Explain.