Question:

Microeconomics not sure of my answers

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65. An increase in the consumer's income will do all of the following, except ______. (Points: 3)

a. shift the budget line away from the origin

b. increase the horizontal intercept

c. increase the vertical intercept

d. change the slope of the budget line

66. If a consumer purchases a combination of commodities X and Y such that MUx/Px = 20 and MUy/Py = 10, to maximize utility, consumers should buy ______. (Points: 3)

a. less of X and more of Y

b. more of X and less of Y

c. more of both X and Y

d. less of both X and Y

67. If a consumer purchases a combination of commodities X and Y such that MUx/Px = 20 and MUy/Py = 5, to maximize utility, the consumers should buy ______. (Points: 3)

a. more of X and less of Y

b. less of X and less of Y

c. more of both X and Y

d. less of both X and Y

I have 65. D, 66. A and 67. C

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1 ANSWERS


  1. d. change the slope of the budget line

    Only a change in relative prices will change the slope of the budget line.

    b. more of X and less of Y

    To make the ratios equal, the consumer needs to decrease the marginal utility of X and increase that of Y.  To increase marginal utility, the consumer buys less of a good, and to decrease it, they buy more of a good.

    a. more of X and less of Y

    Again, the consumer needs to decrease MU of X and increase MU of Y, so they buy more of X and less of Y.

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