The Theory of Consumer Behaviour
Economics · 50 practice questions
Utility (cardinal, ordinal, total, average, marginal); indifference curve and budget line; diminishing marginal utility and the law of demand; consumer equilibrium via indifference curve/marginal analysis; effects of shifts in the budget line/indifference curve; consumer surplus.
- Explain the various utility concepts.
- Apply the law of demand using marginal utility analysis.
- Use indifference curve and marginal analyses to determine consumer equilibrium.
- Relate income and substitution effects.
- Apply consumer surplus to real-life situations.
Try a few questions
- Practice question 1
A consumer with ₦2,000 buys good X at ₦200 per unit and good Y at ₦400 per unit, taking 6 units of X and 2 units of Y (6×200 + 2×400 = 2,000). The number of units of X bought on this budget line is
- A.2 units
- B.10 units
- C.8 units
- D.6 units
Show the answer
D. 6 units
The scenario states 6 units of X are purchased, exhausting the ₦2,000 budget.
- Practice question 2
Using MU values 30,24,18,12,6, the combined utility from the 2nd and 3rd units alone is
- A.48
- B.36
- C.42
- D.54
Show the answer
C. 42
MU2 + MU3 = 24 + 18 = 42.
- Practice question 3
Cardinal utility theory assumes that satisfaction from consumption can be
- A.never measured or compared in any way
- B.measured numerically in specific units, unlike ordinal theory which only ranks preferences
- C.ranked only, never assigned a numeric value
- D.identical for every consumer at all times
Show the answer
B. measured numerically in specific units, unlike ordinal theory which only ranks preferences
Cardinal utility assigns numeric "util" values to satisfaction.
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