ECP3704 Exam 2 2025/2026 Exam
Questions Marking Scheme New Update
| A+ Rated
Joe prefers a three pack of soda to a six-pack. What properties does this
preference violate?
Completeness
Transitivity
More is better
Diminishing MRS - 🧠 ANSWER ✔✔More is better
When the price of one good increases, the associated income effect is
represented by a move from one indifference curve to a
Lower indifference curve since real income is now higher
Lower indifference curve since real income is now lower
Higher indifference curve since real income is now higher
1
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STATEMENT. ALL RIGHTS RESERVED
,Higher indifference curve since real income is now lower - 🧠 ANSWER
✔✔Lower indifference curve since real income is now lower
When the price of one good decreases, the associated substitution effect is
represented by a
Move from one indifference to a higher indifference curve since real income
is now higher
Move from one indifference to a lower indifference curve since real income
is now lower
Move along a given indifference curve holding real income constant
Move along a given indifference curve since real income increases - 🧠
ANSWER ✔✔Move along a given indifference curve holding real income
constant
The substitution affect isolates the change in the consumption of a good
caused by:
The lower "real" income
The change in the relative prices of two goods
The change in consumer preferences
2
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
, None of the statements associated with this question are correct - 🧠
ANSWER ✔✔The change in the relative prices of two goods
Given that income is $750 and PX = $32 and PY = $8, what is the market
rate of substitution between goods X and Y?
-0.75
-3
-4
-25 - 🧠 ANSWER ✔✔-4
What is the maximum amount of good Y that can be purchased if X and Y
are the only two goods available for purchase and PX = $10, PY = $15, X =
30, and M = 600?
10
15
20
25 - 🧠 ANSWER ✔✔20 M=PX(X) + PY(Y)
A cash gift causes the budget line to
Shift to the right in a parallel fashion
3
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
Questions Marking Scheme New Update
| A+ Rated
Joe prefers a three pack of soda to a six-pack. What properties does this
preference violate?
Completeness
Transitivity
More is better
Diminishing MRS - 🧠 ANSWER ✔✔More is better
When the price of one good increases, the associated income effect is
represented by a move from one indifference curve to a
Lower indifference curve since real income is now higher
Lower indifference curve since real income is now lower
Higher indifference curve since real income is now higher
1
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
,Higher indifference curve since real income is now lower - 🧠 ANSWER
✔✔Lower indifference curve since real income is now lower
When the price of one good decreases, the associated substitution effect is
represented by a
Move from one indifference to a higher indifference curve since real income
is now higher
Move from one indifference to a lower indifference curve since real income
is now lower
Move along a given indifference curve holding real income constant
Move along a given indifference curve since real income increases - 🧠
ANSWER ✔✔Move along a given indifference curve holding real income
constant
The substitution affect isolates the change in the consumption of a good
caused by:
The lower "real" income
The change in the relative prices of two goods
The change in consumer preferences
2
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
, None of the statements associated with this question are correct - 🧠
ANSWER ✔✔The change in the relative prices of two goods
Given that income is $750 and PX = $32 and PY = $8, what is the market
rate of substitution between goods X and Y?
-0.75
-3
-4
-25 - 🧠 ANSWER ✔✔-4
What is the maximum amount of good Y that can be purchased if X and Y
are the only two goods available for purchase and PX = $10, PY = $15, X =
30, and M = 600?
10
15
20
25 - 🧠 ANSWER ✔✔20 M=PX(X) + PY(Y)
A cash gift causes the budget line to
Shift to the right in a parallel fashion
3
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
