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2 marksTheory of Consumer Demand

CAPE Economics Unit 1 · 2007 · Paper 2 · Question 1(a)(i)

Table 1 presents utility data for Abina's consumption of video games and novels. She has a monthly budget of 100, where both video games and novels cost 20 each.

Define the term 'marginal utility'.

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Other parts of this question

  1. 1(a)(ii)a)Calculate the marginal utility derived from video games.[5 marks]
  2. 1(a)(ii)b)Calculate the marginal utility derived from novels.[5 marks]
  3. 1(b)Draw a diagram illustrating Abina's budget constraint.[5 marks]
  4. 1(c)(i)Calculate the marginal utility per dollar for Abina's consumption choices.[5 marks]
  5. 1(c)(ii)State the optimal combination of video games and novels Abina should consume per month.[2 marks]
  6. 1(d)(i)State how an increase in spending budget by $20, ceteris paribus, affects the quantity of video games and novels consumed.[2 marks]
  7. 1(d)(ii)State how an increase in the price of one of the goods, ceteris paribus, affects the quantity of video games and novels consumed.[2 marks]
  8. 1(e)(i)a)Using the data from Table 2, draw a diagram showing the demand curve and supply curve for housing.[5 marks]
  9. 1(e)(i)b)Indicate the equilibrium price and equilibrium quantity of housing on the diagram.[2 marks]
  10. 1(e)(ii)a)Show a government-imposed price ceiling of $110 on rent on the diagram drawn in (e)(i).[3 marks]
  11. 1(e)(ii)b)i)State the likely effects of the rent price ceiling on the availability of housing.[6 marks]
  12. 1(e)(ii)b)ii)State the likely effects of the rent price ceiling on consumer surplus and producer surplus.[6 marks]

More practice: the rest of this paper · more Theory of Consumer Demand questions · all CAPE Economics Unit 1 past papers