Question 1
Question 2
Question 3
Economists assume that: A. consumer behavior is explained by unlimited resources. B. individuals behave in unpredictable ways. C. optimal decisions are made at a marginal value. Consumers(C) All individuals or those who have wants and thus satisfy their needs by purchasing goods and services in the market are the consumers(C). These goods and services are supplied in the market by the producers. So, both consumers and producers play an important role in the economy.
Question 4
When prices are ( p 1 , p 2 ) = ( 1 , 2 ) a consumer demands ( x 1 , x 2 ) = ( 1 , 2 ) , and when prices are ( q 1 , q 2 ) = ( 2 , 1 ) a consumer demands ( y 1 , y 2 ) = ( 2 , 1 ) . Is this behavior consistent with the model of maximizing behavior? 2. When prices are ( p 1 , p 2 ) = ( 2 , 1 ) a consumer demands ( x 1 , x 2 ) = ( 1 , 2 ) , and when prices are ( q 1 , q 2 ) = ( 1 , 2 ) a consumer demands ( y 1 , y 2 ) = ( 2 , 1 ) . Is this behavior consistent with the model of maximizing behavior? 3. In the preceding question, which bundle is preferred by the consumer, the x-bundle or y-bundle? Types of Goods In an economy, there are various types of goods that have diverse relationships with the level of income and the other goods. Some of the types of goods are normal goods, substitute goods, and complementary goods.
Answer to question 1
Answer to question 2
Answer to question 3
Answer and Explanation: A As resources are always scarce in nature and limited, economists do not assume that consumer behavior is explained by unlimited resources. B Individuals always behave in predictable ways. For instance, the change in demand of goods depends on the price of the goods or other predictable factors in the market. C Individuals always consider and behave as per the utility derived by consuming an additional unit of any product at a given price. If the utility derived is positive, it will consume more and vice-versa. Thus, economists assume the optimal decisions of consumer behavior. So, option C is correct.
Answer to question 4
Answer and Explanation: 1. Initially when the price of the good was 1 and 2 the demand for the good was also 1 and 2. Therefore, it can be said that when the income of the consumer increased there has been no change in the demand for the goods. Therefore, it can be said that the good was not a normal good. The reason being if the price of a normal good rises, the demand for the good decreases. Therefore, the model of maximizing behavior states that consumers are rational and get the most out of a commodity. Therefore, it cannot be said that the behavior was an instance of maximizing behavior. 2. When the price of the good was 1 the demand was 2 and when the price of the good was 2, the demand was 1. Therefore, it can be said that the consumer increased their demand when the price of the good was lower. Therefore, it can be said that the consumer is exhibiting the theory of maximizing behavior as the consumer uses the marginal utility to quench the satisfaction of the goods. 3. The consumer is most likely to prefer bundle x as when the price of bundle y changes the demand for y also changes. However, no matter the price of the bundle x the demand for bundle x did not change.