Can the process of consumer choice as illustrated with a budget line/indifference curves approach explain the downward sloping demand curves that consumers have for goods, such as Pepsi?
What will be an ideal response?
Yes. Measure the quantity of Pepsi consumed on the horizontal axis of the budget line/indifference curve diagram. Holding income and other prices constant, a series of decreases in the price of a Pepsi rotates the budget line outward. As the consumer then moves to successively higher indifference curves, the quantity of Pepsis consumed will increase successively, thereby demonstrating that lower prices increase the quantity demanded.
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The effects of an increase in real money demand on an economy
A) is an argument against flexible exchange rates. B) is an argument in favor of flexible exchange rates. C) shows the difficulties in determining which exchange rate regime is better. D) is an argument in favor of flexible exchange rates only in the short run. E) is an argument against flexible exchange rates only in the short run.
The problem of overfishing in waters that are commonly owned can be solved when the government determines the total amount of fish can be removed from a given area during each fishing season. Then the fishermen
A) will not be able to fish. B) can trade their rights (shares) to fish or not. C) will externalize their private costs to the government. D) will lower their private costs to fish.
Which of the following statements about price discrimination is correct?
a. Price discrimination is always more profitable than charging a single price. b. A price discriminator would want to charge the highest price to those customers with the most elastic demand for his product. c. To be successful, a price discriminator must assure that items can be resold between high- and low-price groups. d. To maximize profit, a price discriminator distinguishes groups with different demands and charges higher prices to those with the more inelastic demand.
In addition to other factors, the increased use of technology and the reduced costs of information transfer from local office to corporate headquarters have
A. reduced the need for middle managers and increased the scope of local decision-making authority. B. only increased the costs of decentralization. C. shown that technology has little impact on the centralization issue. D. significantly increased the need for centralized decision making.