CHAPTER 4 (CLO1, CLO2): THEORY Section Z

OF CONSUMER BEHAVIOR
4. Which diagram shows a change in the
price of good G only?
A. Section X
SECTION A
B. Section Y
C. Section Z
1. The amount of added utility that a D. None of the above
consumer gains from the consumption
of one unit of a good is called 5. Which diagram shows a change
A. incremental utility income?
B. total utility
A. Section X
C. diminishing utility
D. marginal utility B. Section Y
C. Section Z
2. An indifference curve is ________. D. None of the above
A. a straight line sloping downwards.
B. parallel to the X-axis 6. An increase in total utility due to a
C. convex to the origin drop in the price of good E is shown
D. None of the above by ________.
A. movement from A to B in section
3. Which of the following statements is X
possible? B. movement from C to D in section
A. Total utility decreases when Y
marginal utility is zero. C. movement from E to F in section
B. Total utility increases when Z
marginal utility is positive. D. None of the above
C. Total utility decreases when
marginal utility is positive. 7. The price of X is RM5, and the price
D. Total utility increases when of Y is RM4. Which of the following
marginal utility is negative. (X, Y) bundles is affordable, if your
income is RM25?
Refer to the diagrams below, answer A. (0, 7)
questions 4, 5 and 6 B. (3, 3)
C. (3, 2)
G G D. (2, 4)

Refer to the diagrams below, answer

questions 8, 9 and 10
B
A C D Good Y

H 12 A
H
Section X Section Y
8 B
G
` 5 C
3 D
F
1 E
E

H 1 2 3 4 Good X

1
 D. Safi’s budget on Adidas t-shirt
8. The Marginal Rate of substitution from and Nike fitness pant.
A to B is ______.
A. ½ units of Y 13. Which of the following is TRUE
B. ¼ units of Y about consumer equilibrium who
C. 4 units of Y buys a combination of two goods, X
D. 2 units of Y and Y

9. The optimal combination is ______. A. MUX MUX

A. 12 units of Y and 1 unit of X =
B. 8 units of Y and 2 units of X PX PY
C. 3 units of Y and 4 units of X MUX MUY
D. None of the above B. =
PX PY
10. Suppose Siti has RM10 per month the MUY MUY
she spends on “nasi lemak” and fried C. =
noodles. If the price of “nasi lemak” is PX PY
RM2 per pack and the price of fried
noodles is RM1 per pack, which of the MUX MUY
following represents a point on Siti’s D. =
budget line? PY PY
A. 4 packs nasi lemak and 1 pack
fried noodles. 14. In a graph below, AA is the initial
B. 1 packs nasi lemak and 8 packs budget line and BB is the new
fried noodles budget line. Which of the following
C. 3 packs nasi lemak and 1 pack changes might have occurred?
fried noodles.
D. 5 packs nasi lemak and 10 packs Good Y
fried noodles.
A
11. Suppose that Julia likes “apam balik”
and “satay”. If her marginal utility per
ringgit spent on “apam balik” is 6 and B
on “satay” is 5, Julia
A. is maximizing her total utility.
B. could increase her total utility by
buying more “satay” and less
“apam balik”. A B
C. could increase her total utility by Good X
buying more “apam balik” and less
“satay”. A. Px decreased, PY is constant,
D. is maximizing her marginal utility. income increased.
B. Px increased, PY decreased.
12. Safi buys two things, Adidas t-shirt income is constant.
which have a price of RM30 each and C. Px decreased, PY increased,
Nike fitness pant, which have a price income is constant.
of RM40 each. Safi’s income is D. Px constant, PY increased,
RM120. If the price of Nike fitness income decreased.
pant falls to RM20, then
A. Safi’s budget line rotates inward
and becomes steeper
B. Safi’s budget line rotates
outward and becomes flatter.
C. Safi’s budget line unchanged. SECTION B

2
1. Based on the table, answer the a. Calculate the marginal utility per
following questions ringgit of good A, B and C
b. What is the combination of goods
that yields maximum satisfaction
Ice cream Total Marginal to the consumer?
(cup) Utility Utility
3. Azura has RM25 to spend. Suppose
1 8
the price of good J and K are RM8
2 14 and RM4 respectly.

3 18 Quantity TUJ
TUK
4 20
1 56 32
5 20
2 104 60
6 18
3 136 84

4 160 104
a. Calculate the marginal utility at
every cup of ice cream 5 170 116
b. Illustrate the total utilty and
6 176 126
marginal utility.
c. At which cup of ice cream will the 7 178 134
point of satisfaction?

2. The following table shows the a. Calculate the marginal utility for
marginal utility of good A, B and C. each good.
The prices of good A, B and C are b. How many units of goods J and K
RM4, RM3 and RM2 respectively. The should Azura buy to maximize
consumer income is RM30 her utility with the income of
RM52?
c. What is the total utility received
by Azura at equilibrium?
Quantity MUA MUB
MUC d. If Azura’s incomes decreased to
RM28, what quantities of good J
1 45 80 22
and K should she purchase to
2 40 70 20 maximize her utility?
3 25 60 18 e. What is Azura’s new total utility at
equilibrium?
4 20 50 16
5 16 40 14
SECTION C
6 12 30 12
7 9 20 10 1. Explain the law of diminishing
marginal utility.
8 6 10 8 2. Explain the equilibrium of a consumer
9 4 0 6 with the help of the cardinal utility
10 2 0 4 approach.