ECON 410 Test 1 MSA UNC CORRECT
100%
Budget Constraint - ANSWERI = pxX + pyY
or
•y= (I/py) - (px/py) (X)
Vertical intercept - ANSWERI/py
Horizontal intercept - ANSWERI/px
Budget line - ANSWERthe set of all bundles of goods/services that exhausts an
individual's income.
Both good goods/bad goods - ANSWERdownward sloping IC
One bad good and one good good - ANSWERupward sloping IC
Good x is bad or good, good y is neutral - ANSWERvertical sloping IC
good x is neutral, good y is bad or good - ANSWERhorizontal sloping IC
budget set - ANSWERthe set of all bundles under and including the budget line.
MRT - ANSWERmarginal rate of transformation
px/py
Slope of the budget line
OG - ANSWERAll other goods
pog = 1
MRS - ANSWERmarginal rate of substitution
MUx/MUy
∆𝑦 /∆𝑥
MU (of x or y) > 0 - ANSWERgood good
MU (of x or y) <0 - ANSWERbad good
, MU (of x or y) = 0 - ANSWERneutral good
𝑑𝑀𝑅𝑆/d(x or y) > 0 - ANSWERMRS increases as X increases (and decreases as X
decreases), holding Y constant. (vice versa)
𝑑𝑀𝑅𝑆/d(x or y) < 0 - ANSWERthe MRS decreases as X increases (and increases as
X decreases), holding Y constant. (vice versa)
𝑑𝑀𝑅𝑆/d(x or y) = 0 - ANSWERMRS remains constant as X increases or decreases,
holding Y constant. (vice versa)
Nonsatiation and Monotonicity - ANSWERAll else the same, more of a commodity is
better than less.
only applies to good goods
Indifference curve - ANSWERthe graphical set of all bundles of goods that an
individual views as equally desirable.
indifference map - ANSWERcomplete set of indifference curves that summarize a
consumer's tastes.
The IC gets steeper from left to right if: (downward sloping IC) - ANSWERa)
𝒅𝑴𝑹𝑺/dx >𝟎 and 𝒅𝑴𝑹𝑺/dy <𝟎
b) 𝒅𝑴𝑹𝑺/dx >𝟎 and 𝒅𝑴𝑹𝑺/dy =𝟎
c) 𝒅𝑴𝑹𝑺/dx =𝟎 and 𝒅𝑴𝑹𝑺/dy <𝟎
concave
The IC gets flatter from left to right if: (downward sloping IC) - ANSWERa) 𝒅𝑴𝑹𝑺/dx
<𝟎 and 𝒅𝑴𝑹𝑺/dy >𝟎
b) 𝒅𝑴𝑹𝑺/dx <𝟎 and 𝒅𝑴𝑹𝑺/dy =𝟎 𝒅𝒙 𝒅𝒚
c) 𝒅𝑴𝑹𝑺/dx =𝟎 and 𝒅𝑴𝑹𝑺/dy >𝟎
convex
The IC is linear if: - ANSWER𝒅𝑴𝑹𝑺/dx =𝟎 and 𝒅𝑴𝑹𝑺/dy =𝟎
The IC gets flatter from left to right if: (upward sloping) - ANSWERa) 𝒅𝑴𝑹𝑺/dx <𝟎
and 𝒅𝑴𝑹𝑺/dy <𝟎
b) 𝒅𝑴𝑹𝑺/dx <𝟎 and 𝒅𝑴𝑹𝑺/dy =𝟎
c) 𝒅𝑴𝑹𝑺/dx =𝟎 and 𝒅𝑴𝑹𝑺/dy <𝟎
100%
Budget Constraint - ANSWERI = pxX + pyY
or
•y= (I/py) - (px/py) (X)
Vertical intercept - ANSWERI/py
Horizontal intercept - ANSWERI/px
Budget line - ANSWERthe set of all bundles of goods/services that exhausts an
individual's income.
Both good goods/bad goods - ANSWERdownward sloping IC
One bad good and one good good - ANSWERupward sloping IC
Good x is bad or good, good y is neutral - ANSWERvertical sloping IC
good x is neutral, good y is bad or good - ANSWERhorizontal sloping IC
budget set - ANSWERthe set of all bundles under and including the budget line.
MRT - ANSWERmarginal rate of transformation
px/py
Slope of the budget line
OG - ANSWERAll other goods
pog = 1
MRS - ANSWERmarginal rate of substitution
MUx/MUy
∆𝑦 /∆𝑥
MU (of x or y) > 0 - ANSWERgood good
MU (of x or y) <0 - ANSWERbad good
, MU (of x or y) = 0 - ANSWERneutral good
𝑑𝑀𝑅𝑆/d(x or y) > 0 - ANSWERMRS increases as X increases (and decreases as X
decreases), holding Y constant. (vice versa)
𝑑𝑀𝑅𝑆/d(x or y) < 0 - ANSWERthe MRS decreases as X increases (and increases as
X decreases), holding Y constant. (vice versa)
𝑑𝑀𝑅𝑆/d(x or y) = 0 - ANSWERMRS remains constant as X increases or decreases,
holding Y constant. (vice versa)
Nonsatiation and Monotonicity - ANSWERAll else the same, more of a commodity is
better than less.
only applies to good goods
Indifference curve - ANSWERthe graphical set of all bundles of goods that an
individual views as equally desirable.
indifference map - ANSWERcomplete set of indifference curves that summarize a
consumer's tastes.
The IC gets steeper from left to right if: (downward sloping IC) - ANSWERa)
𝒅𝑴𝑹𝑺/dx >𝟎 and 𝒅𝑴𝑹𝑺/dy <𝟎
b) 𝒅𝑴𝑹𝑺/dx >𝟎 and 𝒅𝑴𝑹𝑺/dy =𝟎
c) 𝒅𝑴𝑹𝑺/dx =𝟎 and 𝒅𝑴𝑹𝑺/dy <𝟎
concave
The IC gets flatter from left to right if: (downward sloping IC) - ANSWERa) 𝒅𝑴𝑹𝑺/dx
<𝟎 and 𝒅𝑴𝑹𝑺/dy >𝟎
b) 𝒅𝑴𝑹𝑺/dx <𝟎 and 𝒅𝑴𝑹𝑺/dy =𝟎 𝒅𝒙 𝒅𝒚
c) 𝒅𝑴𝑹𝑺/dx =𝟎 and 𝒅𝑴𝑹𝑺/dy >𝟎
convex
The IC is linear if: - ANSWER𝒅𝑴𝑹𝑺/dx =𝟎 and 𝒅𝑴𝑹𝑺/dy =𝟎
The IC gets flatter from left to right if: (upward sloping) - ANSWERa) 𝒅𝑴𝑹𝑺/dx <𝟎
and 𝒅𝑴𝑹𝑺/dy <𝟎
b) 𝒅𝑴𝑹𝑺/dx <𝟎 and 𝒅𝑴𝑹𝑺/dy =𝟎
c) 𝒅𝑴𝑹𝑺/dx =𝟎 and 𝒅𝑴𝑹𝑺/dy <𝟎
