The limitation that a consumer's total expenditure on goods and services purchased cannot exceed...
Question:
The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as:
a. economizing behavior
b. maximizing behavior
c. the price constraint
d. the budget constraint
Consumer Behaviour
Consumer Behaviour refers to the examination of the activities of an individual or a group of individuals in relation to their economic decisions, purchasing behavior.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerThe correct answer is option d: the budget constraint
Option d: The income of an individual is limited, so the individuals have to fulfill their...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Budget Constraints: Definition & Formula
from
Chapter 1 / Lesson 6
62K
Learn what budget constraint is and view examples. Understand how to use the budget constraint formula and how to represent a budget constraint using a graph.
Related to this Question
- A consumers budget constraint identifies the different bundles of goods and services that can be purchased, given income and prices. A bundle of goods that is located inside the budget constraint: i.
- In the consumer choice problem, consumers are confronted with which of the following? a. A finite budget that constrains the quantity of goods and services that consumers can buy. b. A set of prices for those goods and services. c. A set of different con
- 1. A consumer's spending is restricted because of? A) marginal utility. B) total utility. C) a budget constraint. D) utility maximization. 2. Utility is maximized in the consumption of two goods by equating the? A) marginal utility of one good to the pric
- In allocating their limited incomes over a large set of goods and services, consumers should purchase those goods and services that _____.
- Budget constraints impose scarcity, and are based upon a. How much utility one more unit of a good will provide b. The prices of the items purchased c. The limitation of the budget
- Consumers have to make tradeoffs in deciding what to consume because: A. they are limited by a budget constraint. B. there are not enough of all goods produced. C. not all goods give them the same amount of satisfaction. D. the prices of goods vary.
- What is a consumer's budget constraint? a) Marginal utility of the two goods b) Total income c) Total utility of the two goods d) All of the answers are correct
- A consumer who has a limited budget will maximize utility or satisfaction when the: a. ratios of the marginal utility of each product purchased divided by its price are equal. b. total utility derived from each product purchased is the same. c. marginal u
- Consumers would be a. spending all of their income but not maximizing total utility. b. spending all of their income and maximizing total utility. c. maximizing total utility without spending all of their income. d. None of the answers above is correct.
- Maximum consumer utility is found where: a. MU = TU b. the budget constraint line is the steepest c. the budget constraint line is tangent to the indifference curve d. the budget constraint line has the slope - price ratio
- In order to maximize utility subject to a budget constraint, consumers will: A) choose the consumption bundle where the indifference curve intersects the budget constraint. B) equate the slope of the
- Assume a consumer is currently purchasing a combination of goods, X and Y, that maximizes her utility given her budget constraint, i.e., MUx/MUy = PX/PY. Now assume that there is a decrease in the price of Y. In this case, to once again maximize her utili
- Consumers maximize total utility within their budget constraint by: a. buying the cheapest goods they can find b. buying whatever they like the best c. buying the goods with the largest marginal utility per dollar spent d. spending the same dollar amount
- Assume that a consumer can only purchase two goods with her income. A straight-line budget constraint indicates that the opportunity cost of obtaining an additional unit of one good is: A. negative. B. constant. C. increasing. D. decreasing.
- ''When a consumer maximizes his utility subject to a budget constraint, he always chooses a bundle where he equates his marginal rate of substitution between each pair of goods to the ratio of their two prices.'' Is this correct? Explain.
- Our ability to make purchases is: a. Constrained by the prices of goods and services b. Not constrained by our incomes c. Both of the above d. None of the above
- |Output |Taxes | Disposable Income | Consumption Spending | Saving Planned |Investment | Government Purchases | Planned Aggregate Expenditure Unplanned Inventory |Change |$9,000 |$1,000 | | | $1,000 | $1,000 | | | Assume that the consumption func
- The marginal propensity to consume measures: a. the slope of the consumption line b. the fraction of any additional dollar of disposable income that will be spent on goods and services d. all of the a
- Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that: a. their total utilities are the same. b. their marginal and t
- A consumer can maximize his total utility if he allocates his money income so that: a. elasticity of demand is the same for all the products purchased. b. gain in marginal utility from the last dollar spent on each product purchased is the same. c. total
- An increase in consumer income will a. shift the budget constraint and increase its slope. b. reduce the consumption of all normal goods. c. pivot the budget constraint on the axis with the good that has the higher price. d. shift out the budget constrain
- In allocating their limited incomes over a large set of goods and services, consumers should purchase those goods and services that: a. provide the most utility. b. fit their tastes and preferences. c. provide the most utility per dollar spent. d. are rea
- A consumer has a fixed amount of income to spend, and buys only goods A and B. The price of A is $10 and the price of B is $2. She is currently spending all of her income per week and is buying some amount of A and some amount of B, such that the marginal
- Consider a consumer who consumes only two goods, x and y. His utility over these two goods is given by U (x, y) = x + y. The budget constraint of the consumer is given by 3x + 6y = 300, where 3 is the price of good x, 6 is the price of good y, and 300 is
- A consumer has a utility function U(X, Y) = X^{1/4}Y^{3/4}. The consumer has $24 to spend and the prices of the goods are P_X = $2 and P_Y = $3. Note that MU_X = (1/4)X^{-3/4}Y^{3/4} and MU_Y = (3/4)X^{1/4}Y^{-1/4}. Draw the consumer's budget constraint a
- If resources are allocated efficiently, A) consumer surplus exceeds producer surplus. B) marginal social cost is minimized. C) producer surplus exceeds consumer surplus. D) the sum of consumer surplus and producer surplus is maximized. E) marginal social
- A consumer with income y= $120 obtains utility from two goods X & Y with prices PX =$20 and Py= $10. The consumers budget constraint is written is 20x + 10 y= 120 (or as a first degree polynomial y =
- The discipline of economics can be divided into: a. microeconomics and macroeconomics. b. stocks and flows. c. merchandise and services. d. unlimited wants and limited resources.
- If consumers are rational, they will attempt to limit their purchase of anything that contributes to their satisfaction so that the: A. marginal utility is maximized B. marginal cost is never greate
- If resources are allocated efficiently: a) consumer surplus exceeds producer surplus. b) producer surplus exceeds consumer surplus. c) the sum of consumer surplus and producer surplus is maximized. d) marginal benefit is maximized. e) marginal cost is min
- The slope of the budget constraint is determined by the: a. relative price of the goods measured on the axis, b. relative price of the goods measured on the axis and the consumer's income, c. preferences of the consumer, d. Both b) and c) are correct.
- Any bundle of goods located inside (versus outside) of a consumers budget constraint: i. is unobtainable with the consumers income ii. implies the consumer is not spending all of her income on goods a
- Scarcity implies that A. consumers would be willing to purchase the same quantity of a good at a higher price. B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. C. at the curr
- Scarcity implies that: a. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. b. consumers are too poor to afford the goods and services available. c. at the current market pric
- Maxine has a fixed income per month to spend on goods and services, so in allocating her limited income over a set of goods, she should purchase the goods that _____. A. have the highest utility regardless of price B. have the highest marginal utility C.
- The demand for a product will tend to be elastic when: a. it is quickly consumed. b. it has few close substitutes. c. it is subjected to habitual consumption. d. the purchase of the product takes up a high proportion of a consumer's budget.
- When a consumer is maximizing his or her utility subject to the constraint of income and given prices, then the: a) Total satisfaction derived from each commodity must equal the total satisfaction derived from ever other commodity. b) Ratio of the total s
- The consumer is said to be at a point of saturation when: A. Marginal utility of a commodity is greater than the price of the commodity. B. The extra amount of money a consumer is willing to pay for an additional consumption equates to the prices of each
- the slope of the budget constraint shows which of the following? a- the relative prices of 2 goods b- the marginal rate of substitution c- the rate at which the consumer is willing to trade the two
- Let income be I = $100, P(x) = $1, P(y) = $1 and utility U(x, y) = xy with MU(x) = y and MU(y) = x 1.Write the budget constraint and find the optimal consumption bundle for the consumer 2.Suppose that
- The budget line is the boundary between a. goods and bads. b. preferred and nonpreferred consumption combinations. c. income and expenditure. d. affordable and unaffordable consumption combinations. e
- An allocation of goods and services is not efficient if: a. Trades are possible that make both parties better off. b. Consumer surplus is below its maximum possible level. c. The distribution of goods is highly unequal. d. The demand for an important c
- Utility measures: a. the satisfaction a consumer receives from consuming a bundle of goods. b. the satisfaction a consumer places on their budget constraint. c. the income a consumer receives from consuming a bundle of goods. d. all of the above are corre
- In the Aggregate Expenditure model, the slope of the Expenditure curve is explained by: A) autonomous consumption B) the expenditure multiplier C) the marginal propensity to save D) the marginal propensity to consume
- Suppose a consumer has a utility function for two goods, X and Y, given by U(X, Y) = 2X + 3Y. The consumer has $30 to spend and the prices of good X and good Y are P_X = $2 and P_Y = $5, respectively. Draw the consumer's budget constraint and indicate the
- Given the prices of good X and Y, the (negative of the) slope of the budget constraint (i.e., - PX/PY) measures a. the amount of good Y the consumer is willing to forgo in order to consume one more un
- Every point that lies to the right of the consumer's budget constraint is: A. unattainable, given the current income B. undesirable C. inefficient, given current income D. inferior to the points within the constraint in terms of utility E. insufficient, g
- For a consumer to maximize utility from a given income,: a) the marginal utility from each good must be maximized. b) the total utility from each good must be maximized. c) the marginal utilities of all goods and services consumed must be equal. d) the ma
- Consumers should allocate their scarce income so that: A) the marginal utility for all goods consumed is zero. B) the marginal utility for all goods consumed is equal. C) the marginal utility divided by price is equal for all goods consumed. D) the ma
- The affordable set of goods and services for the consumer is bounded on which side of the budget line?
- The price for x is $4 and the price for y is $1. The consumer has $24 to spend on both goods. What is the basket that maximizes total utility? What is the value of total utility of that bundle? Show a
- Examine the budget constraint for a consumer who has an income of $4. What is the slope of this constraint? a. -1/2 b. 1/2 c. -2 d. 2
- The utility function of a consumer who consumes two products (X1, X2) is: u(x1,x2) = x1x2 + 2x1 The consumer's budget constraint is 4x1 + 2x2 = 60 You are required to: a) Find the expression for marginal utility from consuming each of the two products
- Suppose a consumer is consuming a bundle of goods X and Y which lies on their budget constraint. If the indifference curve which runs through this bundle is steeper than the budget constraint, explain
- A socially optimal price maximizes: a. Producer surplus and minimizes consumer surplus, b. Deadweight loss, c. Consumer surplus and minimizes producer surplus, d. Total surplus.
- Total planned expenditure (equals total output) is 14,000 when autonomous consumption expenditure is 450. When autonomous consumption expenditure falls to 400, total planned expenditure (equals total output) is 13,800. The marginal propensity to consume i
- How does the concept of diminishing marginal utility reflect the consumer's desire to "maximize utility, subject to a budget constraint?"
- A consumer spends his limited income on three goods such that the MU_X = 4, MU_Y = 4, MU_Z = 4; and P_X = 4, P_Y = 2, P_Z = 1. Which of the following statements is (are) true? a. Because the marginal utilities of all three goods are equal, the consumer is
- Based on the Consumer's Theory Model, the following are proper description of the optimal allocation of consumption (X,Y), except: A. Is the point where the consumer maximizes utility given the budget constraint. B. Is the point where the budget constrain
- Given the prices of good X and Y, the (negative of the) slope of the budget constraint (i.e., -PX/PY) measures: a) the amount of good Y the consumer is willing to forgo in order to consume one more unit of good X. b) the ratio of the consumer's income to
- A consumption bundle that lies inside the individual's budget line is a consumption bundle that: A) does not maximize the individual's utility given their tastes, income, and the price of the goods. B) does not exhaust the individual's income. C) the indi
- How is total surplus (the sum of consumer and producer surpluses) related to the efficient level of output? Using a supply and demand curve, demonstrate that producing less than the equilibrium output will lead to an inefficient allocation of resources -
- Suppose a consumer has an income of $30 that is spent on two goods: X and Y. The price of good X is $3.00 and the price of good Y is $1.00. Which of the following bundles of X and Y lie on the individual's budget constraint? a. 8X and 6Y b. 6X and 8Y c. 8
- Suppose a consumer has an income of $30 that is spent on two goods: X and Y. The price of good X is $1.00 and the price of good Y is $3.00. Which of the following bundles of X and Y lie on the individual's budget constraint? a. 8X and 6Y. b. 6X and 8Y. c.
- The relative price of two goods is shown by: a. the slope of an indifference curve. b. the slope of the budget line. c. the diminishing marginal rate of substitution. d. the slope of the income-consumption curve. e. none of the above.
- The marginal propensity to consume is: a. the fraction of an increase in income that would be spent on consumer goods. b. the additional desire people have for consumer goods. c. the fraction of a person's total income normally spent on consumer goods. d.
- The marginal propensity to consume is: a. the fraction of an increase in income that would be spent on consumer goods. b. the additional desire people have for consumer goods. c. the fraction of a person's total income normally spent for consumer goods. d
- The level of aggregate expenditures in a closed economy is determined by the: a. expenditures of consumers and businesses. b. intersection of the saving schedule and the 45-degree line. c. equality of the MPC and MPS. d. intersection of the consumption an
- Consumer surplus measures: A. The marginal utility of all consumers B. The total utility of all consumers minus the total expenditures of all consumers C. The total satisfaction every consumer enjoys when they purchase a good
- Given an individual's current consumption patterns, we know that the person is consuming in such a manner that he is maximizing his satisfaction. Given a decrease in the price of one of the goods he normally purchases, what will happen to the consumer's t
- Expenditures by individuals for durable goods, nondurable goods, and services are known as A. personal calculated expenditures. B. personal computed expenditures. C. personal consumption expenditures. D. total spending.
- The budget line shows the boundary between those combinations of goods and services that: A) have positive marginal utility and those that have negative marginal utility. B) are available and those that are unavailable. C) are desirable and those that
- Some commodities consumed by certain households can be psychologically or physically habit-forming so that the more a person consumes them, the more strongly one desires to consume additional quantities. 1. Describe the behavior of the marginal utilities
- An indifference curve identifies the: a. utility maximizing bundle of goods that the consumer will purchase. b. bundles of goods that can be purchased with a given amount of income. c. bundle of goods that yield the same amount of utility. d. how quantity
- 11. A consumer has $400 in income, the price of food is $1 and the price of Y is $1. Also, the consumer has $100 in SNAP benefits that can only be used for food. BCno S is her budget constraint with n
- Which of the following is (are) true? a. A budget constraint limits what a poor consumer can spend, but there is no similar constraint on rich people. b. Utility maximization requires seeking the greatest utility from a given budget. c. In consumer cho
- Economists assume that: A. consumer behavior is explained by unlimited resources. B. individuals behave in unpredictable ways. C. optimal decisions are made at a marginal value.
- Cross-price elasticity measures the relationship between: a) normal goods and inferior goods. b) complements and inferior goods. c) necessities and luxuries. d) two goods and services. e) income and substitute goods.
- Suppose the utility function for an individual is given by u(x, y) = x + y, where x and y are two goods. The budget constraint of an individual is 2x + 5y = 10, where I = 10 is the income of an individual, P_x = 2 - the price of good x, and P_y = 5 - the
- Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2 respectively and that the consumers' income is $18. What quantities of X and Y should be purchased to maximize u
- A price decrease and an increase in income are similar in that: a. Both force the consumer to achieve a lower level of well-being. b. Both force the consumer to reach a lower indifference curve. c. Both move the budget line outward. d. They are not simila
- An agent consumes goods x and y, with prices Px = $5 per unit and Py = $8 per unit. The consumer's income is I = $48. The government imposes a tax of $1 per unit on good x. What is the new equation for the budget constraint? a) y = 6 - (5/8)x b) y = 6 -
- An efficient allocation of resources maximizes a. consumer surplus. b. producer surplus. c. consumer surplus plus producer surplus. d. consumer surplus minus producer surplus.
- An efficient allocation of resources maximizes: a. consumer surplus minus producer surplus. b. consumer surplus plus producer surplus. c. consumer surplus. d. producer surplus.
- According to economic theory, consumption is really only limited by: A. utility B. substitution effect C. budget constraint D. income effect
- Maximize the utility of two good x and y given by the utility function U(x, y) = xy subject to the budget constraint where the price of x is $3, the price of y is $6 and the individual has an income b
- A consumer spends his limited income on three goods such that the MU_x = 4, MU_y = 4, MU_z = 4; and P_x = 4, P_y = 2, P_z = 1. Which of the following statements is (are) true? Select all that apply. a. Because the marginal utilities of all three goods are
- Consider a rational utility maximizing consumer who is choosing between two goods clothing (C) and food (F), where the total utilities of the two goods are independent so that total utility (U) = Util
- A rational consumer will never purchase a product when its: a. marginal utility is decreasing. b. total utility is decreasing. c. marginal utility is slightly positive. d. marginal utility is negative.
- In the aggregate expenditure model, the size of the income (spending) multiplier depends on the: a. 45-degree line. b. Height of the consumption function. c. Slope of the aggregate demand curve. d. Slope of the consumption function (schedule).
- At all points along an individual's budget constraint: A. the prices of the goods and income are constant B. the level of utility is constant C. income varies, but the prices of the goods are const
- The economy of Stranglehorn has the following parameters: Autonomous desired consumption expenditures are $400. Marginal propensity to consume out of disposable income is 0.90. Net tax rate of nationa
- By choosing to consume at the consumer optimum, consumers will: a. maximize their total utility. b. minimize their total utility. c. maximize the amount they spend on each good. d. minimize the amount they spend on each good.
- Consumer surplus: a. is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price b. is the difference between the maximum prices consumers a
- If consumption is unconstrained, the utility is maximized when: a. The marginal utility of the last unit consumed approaches infinity, b. The cost of the last unit consumed equals zero, c. The cost of the last unit consumed approaches infinity, d. The m
- A consumer wishes to maximize utility; U=(X1^2)+(X2^2) subject to a budget constraint: l= p1x1+p2x2. a. Show graphically the bundle of x1 and x2 that will maximize utility. b.Solve mathematically for the bundle of goods that will maximize utility. c. S
- The production possibilities frontier illustrates the: a. goods and services that people want. b. maximum combinations of goods and services that can be produced. c. resources the economy possesses, but not its level of technology. d. limits to people's w
- If the price of a good decreases and the total expenditure for a consumer on that good increases, then: a. the consumer surplus attached to the good has increased. b. the consumer surplus attached to the good has decreased. c. the price elasticity of dema
- The budget restraint that determines an individual's consumption refers to a. the average disposable income for a particular country. b. the income that an individual has to spend and the prices of the products the individual wants to buy. c. the maximum
- If the consumer's budget constraint is given by 10F + 5S = 100 where F is the quantity of food and S is the quantity of shelter, how much food can he buy with his income remaining if he purchases 2 units of shelter? A. 10 B. 5 C. 20 D. 9 E. None of the ab
Explore our homework questions and answers library
Browse
by subject