Spending $100 on groceries seems like a lot of money to a poor person and like little money to a wealthy person. This statement represents what concept?
A)Reference dependence
B)Preference reversal
C)The sunk cost effect
D)The law of large numbers
E)Invariance principle

Question

Quizplus · Accepted Answer

This statement represents the concept of reference dependence, which means that people's perception of the value of money or goods depends on their reference point or current situation. For a poor person, $100 on groceries may be a significant portion of their income, making it feel like a lot of money. In contrast, $100 may not be significant for a wealthy person, who may spend much more on groceries regularly.

Spending $100 on Groceries Seems Like a Lot of Money