Question

6. If a good has inelastic demand this indicates that consumers are completely insensitive to price changes.

True or False

7. An increase in the price of Krispy Kreme doughnuts will cause a decrease in the demand for Krispy Kreme doughnuts.

True or False

8. The term marginal is associated with incremental or one-unit changes in some variable.

True or False

9. In a budget line/indifference curve framework, the combination actually chosen by the consumer is where there is a tangency between the budget line and an indifference curve.

True or False

10. The combination actually chosen by a consumer in the budget line/indifference curve framework is the one that provides the highest total utility to the consumer that is also an affordable combination.

True or False

Answer 1

6. If a good has inelastic demand this indicates that consumers are completely insensitive to price changes.

False

Inelastic demand means ,demand of a good is less sensitive to the price of that product. Inelastic demand means elasticity is less than one .In other words,percentage change in quantity demanded is less than percentage change in price .

7. An increase in the price of Krispy Kreme doughnuts will cause a decrease in the demand for Krispy Kreme doughnuts.

True

As the Law of demand says, Increase in the price of goods causes decrease in the demand of the good. Price and demand are inversely releated. Hemce increase in the price of Krispy Kreme doughnuts causes a decrease in the demand of doughnuts

8. The term marginal is associated with incremental or one-unit changes in some variable.

True

Maginal means producing and/or consumer one extra unit.

9. In a budget line/indifference curve framework, the combination actually chosen by the consumer is where there is a tangency between the budget line and an indifference curve.

False

The point of tangency on indifference curve and budget line show the best affordable combinatiion of two goods given the budget constraint. The point of tangency shows the utility maximisation solution.

10. The combination actually chosen by a consumer in the budget line/indifference curve framework is the one that provides the highest total utility to the consumer that is also an affordable combination.

False

iI the budget line/indifference curve framework is the point that provides the highest total utility to the consumer that is also an affordable combination is the point of tangency. which iis the utility maximisation solution. the different points on budget line shows different combination of two goods given the budget constraint ,any of which can be choosen by the consumer