- B.Exercise B1: What point is preferred along an indifference curve?
- B.Exercise B2: Why do indifference curves slope down?
- B.Exercise B3: Why are indifference curves steep on the left and flatter on the ri...
- B.Exercise B4: How many indifference curves does a person have?
- B.Exercise B5: How can you tell which indifference curves represent higher or lowe...
- B.Exercise B6: What is a substitution effect?
- B.Exercise B7: What is an income effect?
- B.Exercise B8: Does the income effect involve a change in income? Explain.
- B.Exercise B9: Does a change in price have both an income effect and a substitutio...
- B.Exercise B10: Would you expect, in some cases, to see only an income effect or on...
- B.Exercise B11: Which is larger, the income effect or the substitution effect?
Solutions for Chapter B: Indifference Curves
Full solutions for Principles of Economics | 2nd Edition
the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own
constant returns to scale
the property whereby long-run average total cost stays the same as the quantity of output changes
the value of everything a seller must give up to produce a good
the offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending
the quantity of output that minimizes average total cost
the property of distributing economic prosperity uniformly among the members of society
input costs that require an outlay of money by the firm
a banking system in which banks hold only a fraction of deposits as reserves
something that induces a person to act
medium of exchange
an item that buyers give to sellers when they want to purchase goods and services
nominal interest rate
the interest rate as usually reported without a correction for the effects of inflation
the quantity of goods and services produced from each unit of labor input
the ability of an individual to own and exercise control over scarce resources
a tax for which highincome and low-income taxpayers pay the same fraction of income
the number of percentage points of annual output lost in the process of reducing inflation by 1 percentage point
store of value
an item that people can use to transfer purchasing power from the present to the future
a cost that has already been committed and cannot be recovered
a graph of the relationship between the price of a good and the quantity supplied
the manner in which the burden of a tax is shared among participants in a market
a measure of happiness or satisfaction