problem 1) State and differentiate between the income and substitution effects of a price change.

problem 2) Describe why a consumer will buy more (less) of a commodity when its price falls (rises) by using income and substitution effects.

problem 3) State marginal utility and define the law of diminishing marginal utility.

problem 4) Describe how law of diminishing marginal utility and price elasticity of demand are related.

problem 5) prepare down four assumptions made in theory of consumer behavior.

problem 6) Define the utility maximizing rule.

problem 7) Use utility maximizing rule to find out a consumer’s spending when given income, utility, and price data.

problem 8) Use theory of consumer behavior to define the market shift to compact discs from records since the early 1980s.

problem 9) Describe the diamond-water paradox.

problem 10) Describe how the value of time fits in the theory of consumer behavior and give two exs of implications that result.

problem 11) describe how the theory of consumer behavior helps us understand various values placed on time.

problem 12) Describe why a cash gift will give receiver more utility than a noncash gift costing the same amount.