Homework answers / question archive / The marginal rate of substitution (1) always diminishes as you move along the indifference curve when it is convex (2) is always the ratio of the marginal utilities (3) is always equal to the price ratio when a consumer maximizes her utility (4) all of the above are correct

The marginal rate of substitution (1) always diminishes as you move along the indifference curve when it is convex (2) is always the ratio of the marginal utilities (3) is always equal to the price ratio when a consumer maximizes her utility (4) all of the above are correct

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The marginal rate of substitution (1) always diminishes as you move along the indifference curve when it is convex (2) is always the ratio of the marginal utilities (3) is always equal to the price ratio when a consumer maximizes her utility (4) all of the above are correct. 7. Which of the following statements is correct? (1) Given a higher income, ceteris paribus, if the demand decreases, it is called a Giffen good (2) Given a higher price of one good, ceteris paribus, if the demand of the other good decreases, they are called substitutes (3) Given a higher price of one good, ceteris paribus, if the demand of the other good increases, they are called complements, (4) None of the above is correct. 8. Suppose the demand function of cigarettes is PA Pe. where C, PP.) are the quantity demanded (or demand) of cigarettes, the price of cigarettes, the price of alcohol and your income. Based on the demand function, which of the following statements is not correct? (1) Cigarettes are inferior (2) Cigarettes are Gitten (3) Law of demand for cigarettes is confirmed. (4) Alcohol and cigarettes are substitutes. 9. What is held constant in analysing the income effect? (1) utility (2) purchasing power (3) income (4) prices 10. Which of the following statements about the substitution effect is correct? (1) The Law of demand is confirmed due to the constant prices (2) The convexity ensures the quantity to go up when price goes down (3) The utility increases when the price goes down (4) The purchasing power decreases if the price goes down 11. Which of the following statements is correct? (1) Given a lower price, the substitution effect always increases the quaan tity demanded (2) Given a lower price, the income effect can decrease the quantity de manded (3) Given lower price, the combined effect of income and substitution ef- fects can decrease the quantity demanded. (4) All of the above are correct.