Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-When economists describe the theory of consumer choice, they
A)portray people as simple and methodical with perfectly predictable patterns of behavior.
B)assert that consumer's decisions are based on which goods and services give them the greatest utility within their limited incomes.
C)point out that consumers rarely consider utility in their purchase decisions; they look at other factors like convenience, peer behavior, and price.
D)assert that the retail price is the only variable consumers really consider in making their purchasing decisions.
E)admit that consumer behavior is random and there is no credible economic theory to explain the phenomenon.

Question

Quizplus · Accepted Answer

The theory of consumer choice asserts that consumers make decisions based on which goods and services can give them the greatest utility within their limited incomes. This means that consumers will choose to allocate their limited resources to the goods or services that give them the most satisfaction or utility. In this scenario, the demand for noodles is influenced by the consumer's income and the price of substitute goods. Therefore, the theory of consumer choice can be used to explain how the consumer's decision-making process is affected by changes in these variables.

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation