Multiple choice

1. According to the law of demand there is ________ relationship between price and quantity demanded. (Points : 1) 

a positive

a negative

either a positive or negative

a constantly changing 

2. When the decrease in the price of one good causes the demand for another good to decrease, the goods are (Points : 1) 

normal.

inferior.

substitutes.

complements. 

3. If a household's income falls by 10%, its budget constraint will (Points : 1) 

shift out parallel to the old one.

pivot at the Y-intercept.

shift in parallel to the old one.

be unaffected. 

4. We can state the utility-maximizing rule in words in the following way: A person maximizes utility when she equalizes the ________ across products. (Points : 1) 

total utility

total utility per dollar spent

marginal utility

marginal utility per dollar spent