“· Theory of Consumer Behaviour.” - One Line Questions

1. Consumer equilibrium is achieved when the indifference curve is: — Tangent to the budget line
2. Ordinal utility theory suggests that consumers can: — Only rank their preferences for different bundles of goods
3. Which economic theory assumes that consumers make rational choices to maximize their satisfaction? — Neoclassical Consumer Theory
4. The endowment effect, a concept from behavioral economics, describes the tendency for people to: — Value something more highly simply because they own it
5. The assumption of 'transitivity' in consumer preferences means that if a consumer prefers A to B, and B to C, then they must prefer: — A to C
6. The theory of intertemporal choice deals with how individuals make decisions about: — Consumption and saving over time
7. Indifference curves typically have a shape that is: — Convex to the origin
8. A positive network externality, also known as a network effect, leads to: — Increasing demand as more people use the good
9. In the context of quasi-linear utility, demand for the 'numeraire' good (the good in which utility is linear) is: — Dependent on income but independent of its own price
10. The indifference curve represents combinations of two goods that yield: — The same level of satisfaction
11. For a normal good, the Engel curve slopes: — Upward
12. Which curve is derived from the tangency points of indifference curves and budget lines as income changes? — Engel Curve
13. What does the theory of consumer behavior primarily aim to explain? — How individuals make purchasing decisions to maximize their satisfaction given constraints
14. The Slutsky equation decomposes the total effect of a price change into: — Substitution and income effects
15. The Hicksian compensated demand curve shows the relationship between the price of a good and the quantity demanded, holding: — Utility constant
16. A Giffen good is a special type of inferior good where the: — Income effect is negative and larger than the substitution effect
17. The Law of Diminishing Marginal Utility states that as a consumer consumes more units of a good, the additional utility gained from each extra unit: — Decreases
18. According to revealed preference theory, if a consumer chooses bundle A over bundle B, then bundle A is considered: — Revealed to be preferred to bundle B
19. The theory of revealed preferences, developed by Paul Samuelson, aims to: — Infer consumer preferences from observed choices
20. The rate at which individuals are willing to trade consumption today for consumption tomorrow is known as the: — Marginal Rate of Time Preference (MRTP)
21. The 'bandwagon effect' is a type of positive network externality where consumers desire a good because: — It is popular and widely adopted
22. The 'snob effect' is a type of negative network externality where consumers desire a good because: — It is exclusive and not widely adopted
23. The income effect refers to the change in consumption of a good due to a change in: — Real income (purchasing power)
24. An Engel curve illustrates the relationship between the quantity of a good consumed and: — Income
25. Network externalities occur when the utility a consumer derives from a good depends on: — The number of other consumers using the same good
26. A consumer will continue to purchase a good as long as its marginal utility is: — Greater than the price
27. At the point of consumer equilibrium, the Marginal Rate of Substitution (MRS) is equal to the: — Ratio of prices of the two goods
28. The backward-bending labor supply curve illustrates a situation where, beyond a certain wage rate, an increase in wages leads to: — Less work and more leisure
29. For a normal good, the income effect is: — Positive
30. The Strong Axiom of Revealed Preference (SARP) is a more stringent condition than WARP because it considers: — Transitive choices over a series of budget sets
31. The concept of 'habit formation' in consumer behavior suggests that: — Past consumption influences current preferences
32. Behavioral economics introduces psychological factors into consumer theory, challenging the assumption of perfect rationality. One such factor is: — Framing effects
33. For an inferior good, the income effect is: — Negative
34. The slope of an indifference curve at any point is known as the: — Marginal Rate of Substitution (MRS)
35. Cardinal utility theory posits that utility can be: — Measured and quantified numerically
36. Which of the following is NOT a typical assumption of the standard theory of consumer behavior? — Inconsistent preferences
37. The substitution effect refers to the change in consumption of a good due to a change in: — Its relative price compared to other goods
38. According to prospect theory, people are generally: — Risk-averse in gains and risk-seeking in losses
39. The concept of utility, in economics, refers to: — The satisfaction a consumer derives from consuming a good
40. The concept of 'quasi-linear utility' implies that a consumer's utility function is linear in one good and non-linear in others. This means: — The MRS between the non-linear good and any other good is independent of the amount of the linear good consumed
41. The concept of 'consumer surplus' is the difference between: — The price consumers are willing to pay and the price they actually pay
42. The Marginal Rate of Substitution (MRS) between two goods, X and Y, indicates: — The rate at which a consumer is willing to give up good Y to get one more unit of good X, while maintaining the same level of satisfaction
43. The slope of the budget line is determined by: — The ratio of the prices of the two goods
44. A budget line shows all the combinations of two goods that a consumer can purchase given: — Their income and the prices of the goods
45. Marginal utility is defined as the: — Additional satisfaction gained from consuming one more unit of a good
46. The Weak Axiom of Revealed Preference (WARP) states that if a consumer chooses bundle A when bundle B is affordable, then they should not choose bundle B when bundle A is affordable. — True
47. For an inferior good, the Engel curve slopes: — Downward
48. The Marshallian demand curve shows the relationship between the price of a good and the quantity demanded, holding: — Income and the prices of other goods constant
49. A consumer's choice between work and leisure is determined by the trade-off between: — Utility from consumption and disutility from work
50. A higher discount rate implies that an individual: — Values present consumption more than future consumption
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