Which of the following statements is true?
A) A consumer's buying decisions do not indicate anything about her tastes and preferences.
B) A consumer's demand for a good determines the price of the good in a perfectly competitive market.
C) The relative prices of goods do not affect a consumer's buying decision.
D) A consumer in a perfectly competitive market buys only a tiny fraction of the total amount produced.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a consumer buys only a tiny fraction of the total amount produced because there are many buyers and sellers, and no single buyer or seller has any influence on the market price. A consumer's demand for a good does not determine the price in a perfectly competitive market as the price is determined solely by the market forces of supply and demand. A consumer's buying decisions do indicate her tastes and preferences as the choices she makes reflect her preferences for certain goods over others. The relative prices of goods also affect a consumer's buying decision as she considers the opportunity cost of purchasing one good over another.

Which of the Following Statements Is True