Question

1. What assumption is made when considering the theory of consumer behavior?

A. People do not have preferences.
B. Consumers always buy the lowest price item.

C. There are no budget limits.

D. People engage in rational behavior.

2. In a representative democracy, voters are _______ and politicians are _______.

A. principals; agents
B. employees; agents
C. logrollers; principals

D. agents; employees

3. On what assumption do neoclassical and behavioral economics disagree?

A. People have motivations.
B. People are almost entirely self-interested.
C. People are free to make decisions.

D. People have preferences.

4. The price elasticity of supply measures how
A. responsive the quantity supplied of Y is to changes in the price of X.
B. responsive the quantity supplied of X is to changes in the price of X.
C. responsive quantity supplied is to a change in incomes.
D. easily labor and capital can be substituted for one another in the production process.

Answer 1

1.) Option 'D' is correct. Theory of consumer behavior assumes that consumers have limited income and all of their wants cannot be satisfied, consumer's wants are very broad and consumers behave rationally to maximize their own satisfaction.

2.)Option 'A' is correct. In a representative democracy,voters are the true King so they are principal and politicians are mere agents .

3.)Option B is correct. The basic fundamental on which both the theory is rational thinking as sometimes people often go by emotions.Neo classical theory assumes people are rational whereas behavioral economics theory states that they are not always rational as they are often driven by emotions.Also, Behavioral model also disagree with the fact that people are almost entirely self interested.Behavioral model also question the fact of motivation as if they face losses the human behavior is to be de- motivated.Option B seems to be the best answer as behavioral disagree with the fact that people are almost entirely self-interested whereas this is an assumption in neo classical theory

4.)Option B is correct. Price elasticity of supply is defined as the measure of responsiveness in the quantity supplied for a commodity as a result of change in price of the SAME commodity.