Consumer Theory — Practice Set 2

An indifference curve shows:

Indifference curves are typically convex to the origin because of:

The marginal rate of substitution equals:

Consumer equilibrium occurs where:

If MRS > Px/Py, the consumer should:

For perfect substitutes, indifference curves are:

For perfect complements (e.g., left and right shoes), indifference curves are:

The substitution effect of a price increase:

A Giffen good is a theoretical inferior good for which:

An increase in income shifts the budget line ___ and for a normal good the new optimum has ___ of both goods.