Which of the following statements is true?
A) All rational economic agents attempt to maximize their income.
B) A rational consumer makes his decisions depending on what the majority chooses.
C) A budget constraint is an economic tool that quantifies the trade-off between the consumption of two goods.
D) A trade-off refers to the exchange of goods between economic agents through the barter system or mutual exchange.

Question

Quizplus · Accepted Answer

A budget constraint is an economic concept that shows the feasible combinations of two products that a consumer can buy within a given income and at prevailing market prices. It is used to illustrate the trade-off between two goods that a consumer has to make given his income and price of goods. A is not true because income maximization may not be the only objective of rational decision-making. B is not true because a rational consumer makes choices based on his own preferences and not because of what the majority decides. D is not true because trade-off refers to the decision-making process that involves selecting between two alternatives where a gain in one means a loss in another. It is not related to the barter system or mutual exchange.

Which of the Following Statements Is True