Question 1

A decrease in the price of a good enhances the consumer's purchasing power.The income effect applies to both normal and inferior goods by encouraging the consumer to purchase more.

Accepted Answer

The income effect encourages consumers to purchase more of a good when its price decreases only if the good is normal. For inferior goods, the income effect may lead to purchasing less of the good.

Question 2

Behavioral economics

Accepted Answer

Behavioral economics incorporates insights from psychology and sociology into traditional economic analysis, examining how people's behavior deviates from the rational utility maximization assumption underlying traditional economics. It seeks to understand how people make decisions and how they respond to various incentives and influences.

Question 3

In allocating time between competing uses,

Accepted Answer

When allocating time between competing uses, an individual will try to equate marginal utilities per hour spent on each activity. This means that the individual will try to allocate their time in a way that gives them equal satisfaction or benefit from each activity per hour spent on it. This is because the opportunity cost of spending time on one activity is the benefit or satisfaction that could have been derived from spending time on another activity. Therefore, the goal is to allocate time in a way that maximizes overall satisfaction or benefit.

Question 4

People sometimes try to limit the options they have available.This

Accepted Answer

Behavioral economic analysis suggests that people often experience decision fatigue or cognitive overload when faced with too many options, leading them to limit their choices as a way to simplify the decision-making process. This phenomenon is sometimes referred to as choice overload.

Question 5

The substitution effect of a decrease in the price of an inferior good encourages the consumer to purchase more of the good while the income effect encourages the consumer to purchase less of it.

Accepted Answer

The substitution effect results in a higher quantity demanded of the good when its price decreases, regardless of whether it is an inferior or a normal good. However, the income effect of a decrease in price is different for inferior and normal goods. For inferior goods, the income effect results in a decrease in quantity demanded when the consumer's purchasing power increases, since they may prefer to switch to a higher-quality or more expensive good. This means that the substitution effect and income effect work in opposite directions for inferior goods, resulting in an ambiguous net effect on quantity demanded.

Question 6

In allocating time between studying French and studying economics,

Accepted Answer

By thinking of students "buying" exam points with hours spent studying, we can use the concept of opportunity cost to determine how much time a student should spend on each subject to maximize their exam points. The more time spent studying, the higher the potential exam points, but there is a diminishing marginal return to studying. Therefore, a student should allocate their time between the two subjects in a way that maximizes their overall exam points, which can be thought of as the "purchase" made with their time.

Question 7

Behavioral economics

Accepted Answer

Behavioral economics highlights that human behavior often deviates from traditional economic models of rationality and maximization, acknowledging that people sometimes act in ways that do not align with maximizing utility or profit.

Question 8

If macaroni and cheese is an inferior good,then

Accepted Answer

According to the definition of an inferior good, as income rises, the demand for it decreases. This is because consumers switch to higher-quality goods as they can afford to do so. Therefore, the income effect and substitution effect work in opposite directions for inferior goods, with the income effect dominating.

Question 9

The market demand curve for a good is found by

Accepted Answer

The market demand curve is derived by horizontally summing the quantities demanded by all consumers at each price level.

Question 10

The market demand curve for a particular good

Accepted Answer

If more consumers enter the market, the overall demand for the good increases, which shifts the demand curve to the right.

Question 11

The market demand curve for a particular good

Accepted Answer

The market demand curve is the aggregation of all individual demand curves, which are typically downward sloping. Therefore, the market demand curve is also likely to be downward sloping.

Question 12

If the substitution effect of a lowered price is partly or fully offset by the income effect,we know that the good in question is a(n)

Accepted Answer

An inferior good is a good for which demand decreases as income increases. When the price of an inferior good decreases, the income effect may make consumers feel like they have more money to spend, leading them to shift their consumption towards better quality goods. As a result, the substitution effect of the price decrease is offset by the income effect.

Question 13

The market demand curve is

Accepted Answer

The market demand curve represents the demand of all consumers in the market, which is the horizontal sum of individual demand curves. This means that at any given price, it shows the total quantity demanded by all consumers in the market. Option A is incorrect, as it multiplies an individual's demand curve by the number of consumers in the market, but it doesn't give a total market demand. Option B is incorrect because the market demand curve isn't related to total income, but rather the relationship between price and quantity demanded. Option D and E are both incorrect, as they don't accurately describe the market demand curve.

Question 14

Biscuits are an inferior good for Aster,then if their price falls,she

Accepted Answer

The substitution effect suggests that Aster will buy more biscuits because they are now relatively cheaper than other goods. The income effect suggests that Aster will buy fewer biscuits because she is now wealthier and can afford to buy more expensive goods. If the substitution effect is larger than the income effect, then Aster will buy more biscuits.

Question 15

For an inferior good,a rise in price causes

Accepted Answer

The answer of For an inferior good,a rise in price...

Question 16

The theory of consumer demand

Accepted Answer

The theory of consumer demand can be used to explain how an individual allocates time between two competing uses. This is known as the theory of time allocation or time use. It is an extension of the theory of consumer behavior that explains how individuals allocate their income or budget between goods and services. Therefore, option A is the best choice. The other options are not correct because the theory of consumer demand is not limited to physical goods, goods and services purchased for cash, or perfect rationality, and it can explain the demand for both normal and inferior goods.

Question 17

Normal goods always obey the law of demand because,as the price of such a good rises,the

Accepted Answer

The answer of Normal goods always obey the law of...

Question 18

Suppose there are three buyers in the market for bottled water.At a price of $2 per bottle,Jerry demands 23 bottles,Elaine demands 14 bottles,and Kramer demands 7 bottles.One point on,the market demand curve for bottled water is

Accepted Answer

The market demand curve is the horizontal sum of individual demand curves. At a price of $2 per bottle, Jerry, Elaine, and Kramer demand 23, 14, and 7 bottles respectively, for a total quantity demanded of 23+14+7 = 44 bottles. Therefore, the market demand curve is represented by the point where the price is $2 and the quantity demanded is 44 bottles, which is option D.

Question 19

For a normal good,the

Accepted Answer

For a normal good, both the income effect (increase in income leads to increase in quantity demanded) and substitution effect (price decrease leads to increase in quantity demanded) work in the same direction, leading to an overall increase in quantity demanded.

Question 20

Procrastination,addiction,and honesty

Accepted Answer

Procrastination and addiction involve irrational behavior that goes against narrow definitions of rationality. Honesty may also be considered irrational if it goes against self-interest or the desire to maximize utility. These behaviors may be better explained by behavioral economics, which takes into account the limitations of human decision-making.

Quiz 6: Consumer Choice

A decrease in the price of a good enhances the consumer's purchasing power.The income effect applies to both normal and inferior goods by encouraging the consumer to purchase more.

Behavioral economics

In allocating time between competing uses,

People sometimes try to limit the options they have available.This

The substitution effect of a decrease in the price of an inferior good encourages the consumer to purchase more of the good while the income effect encourages the consumer to purchase less of it.

In allocating time between studying French and studying economics,

Behavioral economics

If macaroni and cheese is an inferior good,then

The market demand curve for a good is found by

The market demand curve for a particular good

The market demand curve for a particular good

If the substitution effect of a lowered price is partly or fully offset by the income effect,we know that the good in question is a(n)

The market demand curve is

Biscuits are an inferior good for Aster,then if their price falls,she

For an inferior good,a rise in price causes

The theory of consumer demand

Normal goods always obey the law of demand because,as the price of such a good rises,the

Suppose there are three buyers in the market for bottled water.At a price of $2 per bottle,Jerry demands 23 bottles,Elaine demands 14 bottles,and Kramer demands 7 bottles.One point on,the market demand curve for bottled water is

For a normal good,the

Procrastination,addiction,and honesty