Consumer Theory Quizzes: Test Your Understanding of Consumer Behaviour

Question 1

Define consumer surplus.

Accepted Answer

The difference between what consumers are willing to pay and the actual price they pay.

Answer

The difference between what producers are willing to receive and the actual price they receive.

Answer

The overall satisfaction derived from a specific bundle of goods.

Answer

The marginal utility of the last unit consumed.

Question 2

What does the Engel curve represent?

Accepted Answer

The relationship between household income and spending patterns on a specific product.

Answer

The relationship between product price and quantity demanded.

Answer

The relationship between consumer preferences and budget constraints.

Answer

The relationship between demand elasticity and price changes.

Question 3

How are normal goods differentiated from inferior goods?

Accepted Answer

Normal goods are in higher demand as income rises, while inferior goods are in lower demand.

Answer

Normal goods are in lower demand as income rises, while inferior goods are in higher demand.

Answer

Normal goods have no relationship to income, while inferior goods are influenced by income.

Answer

Normal goods have negative demand, while inferior goods have positive demand.

Question 4

What is the formula for calculating the elasticity of demand?

Accepted Answer

The percentage change in quantity demanded divided by the percentage change in price.

Answer

The percentage change in price divided by the percentage change in quantity demanded.

Answer

The absolute change in quantity demanded divided by the absolute change in price.

Answer

The absolute change in price divided by the absolute change in quantity demanded.

Question 5

Define consumer surplus.

Accepted Answer

The difference between the price consumers pay for a good and the minimum price they would be willing to pay for it.

Answer

The difference between the total utility consumers derive from a good and the price they pay for it.

Answer

The difference between the marginal utility consumers derive from a good and the price they pay for it.

Answer

The difference between the total expenditure consumers make on a good and the total utility they derive from it.

Question 6

Which of the following is NOT a common assumption of the rational choice theory?

Accepted Answer

Individuals are altruistic.

Answer

Individuals have well-defined preferences.

Answer

Individuals make decisions that maximize their expected utility.

Answer

Individuals have perfect information.

Question 7

What is the effect of an increase in the price of a good on the budget line?

Accepted Answer

The budget line shifts inward.

Answer

The budget line shifts outward.

Answer

The budget line becomes steeper.

Answer

The budget line becomes flatter.

Question 8

How does a decrease in the price of a good affect consumer surplus?

Accepted Answer

Increases consumer surplus.

Answer

Decreases consumer surplus.

Answer

No effect on consumer surplus.

Answer

Can either increase or decrease consumer surplus.

Question 9

Which of the indifference curves represents higher levels of utility?

Accepted Answer

The indifference curve located above and to the right of another indifference curve.

Answer

Above and to the left of the lower indifference curve.

Question 10

What does the law of diminishing marginal utility state?

Accepted Answer

As a consumer consumes more of a good, the marginal utility of the good decreases.

Answer

The total utility of the good decreases.

Question 11

What does the term 'income effect' refer to?

Accepted Answer

The change in quantity demanded due to a change in real income.

Answer

The change in quantity demanded due to the change in the price of the good.

Question 12

How does a decrease in the price of a good affect the demand curve for a complementary good?

Accepted Answer

It shifts to the right.

Answer

Shift to the left.

Question 13

Which government policy can lead to an increase in consumer surplus?

Accepted Answer

Subsidy on a good.

Answer

Price floor on a good.

Question 14

Which assumption of rational consumer behaviour suggests that consumers aim to achieve the highest level of satisfaction possible?

Accepted Answer

Consumers maximize utility.

Answer

Consumers have unlimited resources.

Answer

Consumers have perfect information.

Answer

Consumers are logical and consistent.

Question 15

What does the slope of a demand curve indicate?

Accepted Answer

The change in quantity demanded in response to a change in price.

Answer

The change in price in response to a change in quantity demanded.

Answer

The total utility derived from a good.

Answer

The marginal utility of a good.

Question 16

When the price of a good increases, what effect does the income effect typically have on demand for normal goods?

Accepted Answer

Decreases demand.

Answer

Increases demand.

Answer

Increases demand for inferior goods.

Answer

Decreases demand for inferior goods.

Question 17

The cross-price elasticity of demand measures:

Accepted Answer

The percentage change in the quantity demanded of one good in response to a percentage change in the price of another good.

Answer

The percentage change in the price of one good in response to a percentage change in the quantity demanded of another good.

Answer

The total change in the quantity demanded of one good in response to a total change in the price of another good.

Answer

The total change in the price of one good in response to a total change in the quantity demanded of another good.

Question 18

Consumer surplus represents:

Accepted Answer

The difference between the price consumers are willing to pay and the price they actually pay for a good.

Answer

The difference between the total utility derived from a good and the price consumers pay.

Answer

The total utility derived from a good.

Answer

The price consumers pay for a good.

Question 19

Which of the following is NOT a factor that can influence consumer preferences?

Accepted Answer

Traffic laws

Answer

Culture

Answer

Income

Answer

Advertising

Question 20

Elasticity of demand refers to:

Accepted Answer

The responsiveness of quantity demanded to changes in price.

Answer

The responsiveness of price to changes in quantity demanded.

Answer

The total change in quantity demanded.

Answer

The total change in price.

Question 21

Define consumer surplus and describe how it is calculated.

Accepted Answer

Consumer surplus is the difference between the price a consumer is willing to pay for a good and the price they actually pay.

Accepted Answer

Consumer surplus is the area below the demand curve and above the price line.

Answer

Consumer surplus is the same as producer surplus.

Answer

Consumer surplus is always positive.

Question 22

Which of the following is a fundamental assumption of consumer theory?

Accepted Answer

Consumers are rational decision-makers who seek to maximize their satisfaction.

Answer

Consumers have perfect knowledge of all available products and their prices.

Answer

Consumer preferences are fixed and cannot change over time.

Answer

Consumers' behavior is solely driven by habit and impulse.

Question 23

According to utility theory, what does the utility function represent?

Accepted Answer

The overall satisfaction a consumer derives from consuming a good or service.

Answer

The additional satisfaction a consumer gains from consuming one more unit of a good or service.

Answer

The ratio of satisfaction to the amount of a good or service consumed.

Answer

The probability that a consumer will purchase a particular good or service.

Question 24

The price elasticity of demand measures the:

Accepted Answer

Percentage change in quantity demanded divided by the percentage change in price.

Answer

Percentage change in price divided by the percentage change in quantity demanded.

Answer

Total change in quantity demanded divided by the total change in price.

Answer

Ratio of quantity demanded to price.

Question 25

Which of the following is NOT a determinant of consumer surplus?

Accepted Answer

Cost of producing the good or service

Answer

Consumer's willingness to pay for a good or service

Answer

Market price of the good or service

Answer

Consumer's income

Question 26

The law of diminishing marginal utility states that as a consumer consumes more of a good or service:

Accepted Answer

The additional utility from consuming one more unit decreases.

Answer

The total utility from consuming the good or service decreases.

Answer

The average utility from consuming the good or service increases.

Answer

The elasticity of demand for the good or service decreases.

Question 27

In a perfectly competitive market, the demand curve facing an individual business is:

Accepted Answer

Perfectly elastic

Answer

Perfectly inelastic

Answer

Downward-sloping

Answer

Upward-sloping

Question 28

Expected utility theory assumes that consumers:

Accepted Answer

Make decisions based on the probability-weighted average of potential outcomes.

Answer

Are risk-neutral and indifferent to uncertainty.

Answer

Are risk-averse and prefer certain outcomes over uncertain ones.

Answer

Can accurately predict future outcomes with certainty.

Question 29

According to the law of diminishing marginal utility, as consumption of a good increases:

Accepted Answer

The additional satisfaction gained from each additional unit decreases

Answer

The total satisfaction derived from consuming all units increases

Answer

The average satisfaction derived from consuming all units increases

Answer

The marginal utility of the good remains constant

Question 30

The demand curve illustrates the relationship between:

Accepted Answer

Price and quantity demanded

Answer

Income and quantity demanded

Answer

Price and quantity supplied

Answer

Income and quantity supplied

Question 31

Price elasticity of demand measures the:

Accepted Answer

Responsiveness of quantity demanded to price changes

Answer

Responsiveness of price to changes in quantity demanded

Answer

Responsiveness of quantity supplied to price changes

Answer

Responsiveness of price to changes in quantity supplied

Question 32

Consider a consumer with the utility function U(x, y) = x^2 + y^2. The marginal utility of x is:

Accepted Answer

2x

Answer

2y

Answer

x^2

Answer

y^2

Question 33

Which of the following is NOT a fundamental assumption of consumer theory?

Accepted Answer

Consumers' preferences are influenced by their culture and personal experiences

Answer

Consumers act rationally

Answer

Consumers have perfect knowledge

Answer

Consumers' preferences are consistent

Question 34

What is the definition of marginal utility?

Accepted Answer

The additional satisfaction derived from consuming one more unit of a good

Answer

The total satisfaction derived from consuming all units of a good

Answer

The average satisfaction derived from consuming all units of a good

Answer

The change in satisfaction resulting from a one-unit decrease in consumption

Question 35

What does the elasticity of demand measure?

Accepted Answer

The responsiveness of quantity demanded to changes in price

Answer

The responsiveness of quantity supplied to changes in price

Answer

The responsiveness of marginal utility to changes in consumption

Answer

The responsiveness of total utility to changes in consumption

Question 36

Which of the following graphical representations depicts consumer surplus?

Accepted Answer

The area below the demand curve and above the price line

Answer

The area below the price line and above the supply curve

Answer

The area below the marginal cost curve and above the average cost curve

Answer

The area below the marginal revenue curve and above the average revenue curve

Question 37

What is the indifference curve map?

Accepted Answer

A graphical representation of all combinations of goods that yield the same level of satisfaction

Answer

A graphical representation of all combinations of goods that are equally affordable

Answer

A graphical representation of the optimal consumption bundle for a consumer

Answer

A graphical representation of the change in utility as consumption of one good changes

Question 38

What is the law of diminishing marginal utility?

Accepted Answer

As consumption of a good increases, the marginal utility of each additional unit consumed decreases

Answer

As consumption of a good decreases, the marginal utility of each additional unit consumed increases

Answer

As income increases, the marginal utility of all goods consumed increases

Answer

As income decreases, the marginal utility of all goods consumed decreases