Describe the consumer equilibrium in the indifference curve/budget line model
What will be an ideal response?
A consumer equilibrium occurs when the consumer is spending his or her entire income (is on the budget line), and is on the highest attainable indifference curve (is consuming the "best" point on the budget line).The equilibrium occurs at the point where the budget line just touches the highest indifference curve at one point. At this point, the budget line and indifference curve have the same slope, so the marginal rate of substitution (the slope of the indifference curve) is equal to the relative price (the slope of the budget line).
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A government sometimes creates an excess supply of a product by setting a minimum price at which the product may be sold to consumers. This is sometimes called a
A) price ceiling. B) subsidy. C) tax. D) price floor.
What are two benefits of the new auto-emission standards?
What will be an ideal response?
Answer the following statements true (T) or false (F)
1) Built-in stability is synonymous with discretionary fiscal policy. 2) The actual budget may be in deficit while the cyclically adjusted budget is in surplus. 3) An increase in the cyclical deficits will automatically increase the cyclically adjusted budget deficit. 4) Tax revenues automatically increase during economic expansions and decrease during recessions.
Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $9:
A. the market would clear.
B. a surplus of 20 units would occur.
C. a shortage of 20 units would occur.
D. demand would change from columns (3) and (2) to columns (3) and (1).