Asked by Kelin Martinez on Jun 13, 2024
Verified
Pedro buys market basket A that includes 10 books at a price of $20 per book and 10 DVDs at a price of $10 per DVD. Market basket B contains 12 books and 12 DVDs. Based on this information, which of the following statements is NOT true?
A) Revealed preference analysis implies that Pedro only prefers basket B to basket A if basket A is more expensive.
B) Pedro prefers market basket B to basket A.
C) Market basket B will cost more than basket A.
D) If the prices change and Pedro chooses market basket C, which now costs the same as basket B, then basket C is prefer to basket A.
Revealed Preference Analysis
An economic theory assuming that the choices made by individuals reveal their preferences and the value they assign to those choices, used primarily in consumer behavior analysis.
Market Basket
A fixed set of goods and services whose total cost is tracked over time to measure inflation and the cost of living.
Price of Books
The amount of money required to purchase books, which may vary based on factors like genre, author, and publication date.
- Examine the effects of price and income fluctuations on consumer decision-making and well-being.
Verified Answer
Learning Objectives
- Examine the effects of price and income fluctuations on consumer decision-making and well-being.
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