REVIEW QUESTIONS
Exercise B1
What point is preferred along an indifference curve?
Exercise B2
Why do indifference curves slope down?
Exercise B3
Why are indifference curves steep on the left and flatter on the right?
Exercise B4
How many indifference curves does a person have?
Exercise B5
How can you tell which indifference curves represent higher or lower levels of utility?
Exercise B6
What is a substitution effect?
Exercise B7
What is an income effect?
Exercise B8
Does the “income effect” involve a change in income? Explain.
Exercise B9
Does a change in price have both an income effect and a substitution effect? Does a change in income have both an income effect and a substitution effect?
Exercise B10
Would you expect, in some cases, to see only an income effect or only a substitution effect? Explain.
Exercise B11
Which is larger, the income effect or the substitution effect?