AP Microeconomics: Consumer Choice and Demand Worksheet

Question 1

A student gets total utility from slices of pizza as follows: 0 slices = 0 utils, 1 slice = 18 utils, 2 slices = 32 utils, 3 slices = 42 utils, 4 slices = 48 utils, and 5 slices = 50 utils. Find the marginal utility of the 4th slice and explain whether marginal utility is diminishing.

Accepted Answer

The marginal utility of the 4th slice is 6 utils because total utility rises from 42 to 48 utils. Marginal utility is diminishing because each additional slice adds fewer utils than the slice before it.

Question 2

A consumer is choosing between tacos and sodas. A taco costs $2 and has a marginal utility of 10 utils. A soda costs $1 and has a marginal utility of 6 utils. Based on marginal utility per dollar, which good should the consumer buy more of at the current bundle?

Accepted Answer

The consumer should buy more sodas because sodas provide 6 utils per dollar, while tacos provide 5 utils per dollar. To increase total utility, the consumer should shift spending toward the good with the higher marginal utility per dollar.

Question 3

A consumer has $24 to spend on movies and snacks. Movies cost $8 each and snacks cost $4 each. Write the budget constraint, find the maximum number of movies, find the maximum number of snacks, and state the opportunity cost of 1 movie in terms of snacks.

Accepted Answer

The budget constraint is 8M + 4S = 24. The consumer can buy a maximum of 3 movies or 6 snacks. The opportunity cost of 1 movie is 2 snacks because $8 spent on a movie could have bought two $4 snacks.

Question 4

A consumer has $30 to spend on good X and good Y. Good X costs $5 and good Y costs $3. Determine whether the bundle with 4 units of X and 4 units of Y is affordable. Then determine whether the bundle with 3 units of X and 5 units of Y is affordable.

Accepted Answer

The bundle with 4 units of X and 4 units of Y costs $32, so it is not affordable. The bundle with 3 units of X and 5 units of Y costs $30, so it is affordable and uses all of the consumer's income.

Question 5

At a certain bundle, a consumer is willing to give up 3 units of good Y to get 1 more unit of good X while staying equally satisfied. The price of X is $4 and the price of Y is $2. Should the consumer buy more X, buy more Y, or stay at the current bundle to maximize utility?

Accepted Answer

The consumer should buy more X. The marginal rate of substitution is 3, while the price ratio Px/Py is 2. Since the consumer values an extra unit of X more than it costs relative to Y, buying more X and less Y can increase utility.

Question 6

A consumer has $10. Apples cost $2 each and bananas cost $1 each. Marginal utility per dollar values are: apples 10, 8, 6, 4, 2 for the first through fifth apples; bananas 10, 8, 6, 4, 2, 1 for the first through sixth bananas. What bundle maximizes utility if the consumer spends all $10?

Accepted Answer

The utility-maximizing bundle is 3 apples and 4 bananas. The consumer buys units in order of highest marginal utility per dollar while staying within the $10 budget, and this bundle uses the full budget.

Question 7

Explain how the law of demand can be derived from consumer choice when the price of a good falls, assuming all else stays constant.

Accepted Answer

When the price of a good falls, the good becomes relatively cheaper, so consumers tend to substitute toward it. The lower price also increases purchasing power, which can increase quantity demanded for normal goods. Together, these effects help explain why quantity demanded usually rises when price falls.

Question 8

A consumer has $40 to spend on pizza and salad. Pizza originally costs $10 and salad costs $8. Then the price of pizza falls to $5 while the price of salad stays the same. Describe how the budget line changes.

Accepted Answer

The budget line rotates outward along the pizza axis. The maximum amount of pizza increases from 4 pizzas to 8 pizzas, while the maximum amount of salad remains 5 salads because the price of salad and income do not change.

Question 9

When income rises, a student's demand for bus rides falls and demand for restaurant meals rises. Classify each good as normal or inferior and explain your classification.

Accepted Answer

Bus rides are an inferior good for this student because demand falls when income rises. Restaurant meals are a normal good for this student because demand rises when income rises.

Question 10

Three consumers have the following quantities demanded of a product. At a price of $5, Ana demands 2 units, Ben demands 1 unit, and Cara demands 0 units. At a price of $3, Ana demands 5 units, Ben demands 4 units, and Cara demands 2 units. Find the market quantity demanded at each price.

Accepted Answer

At a price of $5, the market quantity demanded is 3 units because 2 + 1 + 0 = 3. At a price of $3, the market quantity demanded is 11 units because 5 + 4 + 2 = 11.

Question 11

A consumer is willing to pay $20 for the first concert ticket, $16 for the second ticket, and $12 for the third ticket. If the market price is $10 per ticket and the consumer buys 3 tickets, calculate total consumer surplus.

Accepted Answer

Total consumer surplus is $18. The surplus is $10 on the first ticket, $6 on the second ticket, and $2 on the third ticket, so $10 + $6 + $2 = $18.

Question 12

The price of printer ink rises. Explain what is likely to happen to the demand for printers if printers and ink are complements.

Accepted Answer

The demand for printers is likely to decrease. Since printers and ink are complements, a higher price for ink makes using printers more expensive, so consumers tend to buy fewer printers at every printer price.

Question 13

The price of a good falls from $10 to $8, and quantity demanded rises from 50 units to 70 units. Use the midpoint method to calculate the price elasticity of demand and state whether demand is elastic or inelastic.

Accepted Answer

The midpoint price elasticity of demand is 1.5 in absolute value. Quantity changes by 20 over a midpoint of 60, and price changes by 2 over a midpoint of 9, so elasticity is about 0.333 divided by 0.222, which equals 1.5. Demand is elastic because the value is greater than 1.

Question 14

Explain why two indifference curves for the same consumer cannot cross.

Accepted Answer

Two indifference curves cannot cross because a crossing would imply inconsistent preferences. The consumer would appear to be equally satisfied by bundles that should give different levels of satisfaction, which violates the basic assumption of consistent consumer preferences.

Question 15

A consumer's optimal quantity of a good is 2 units when the price is $6, 3 units when the price is $4, and 5 units when the price is $2. Use these points to describe the consumer's demand curve.

Accepted Answer

The demand curve includes the points ($6, 2), ($4, 3), and ($2, 5), with price on the vertical axis and quantity on the horizontal axis. The curve slopes downward because the consumer chooses a larger quantity as the price falls.

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AP Microeconomics: Consumer Choice and Demand

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