Describe how the substitution effect and the income effect influence decisions
What will be an ideal response?
-The substitution effect and the income effect describe two different ways that a consumer can change his or her spending patterns.
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Financial monetary assets which often cannot be readily used in commercial exchanges are included in
A) M1. B) M2. C) prepaid accounts. D) credit cards.
What is gained when people engage in specialization and trade?
A) Specialization and trade allow people to consume outside their individual production possibilities frontiers. B) Specialization and trade allow people to consume at a point on their production possibilities frontiers. C) Specialization and trade allow people to produce outside their individual production possibilities frontiers. D) Specialization and trade allow people to consume inside their production possibilities frontiers. E) There are no gains from specialization and trade.
Which of the following explains why economists may disagree over normative issues?
a. They have different beliefs and values. b. They examine the same data to draw their conclusions. c. They need to disagree in order to publish their research findings. d. They often employ different statistical techniques when examining data. e. Some work only on microeconomic issues, while others focus exclusively on macroeconomic issues.
Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the buyer's surplus from this transaction was:
A. $195 B. $20 C. $10 D. $215