Asked by Fitri Hj Ahmad on Jul 06, 2024
Verified
Suppose that after an increase in price, a consumer chooses not to purchase the good because she perceives that the price increase is fundamentally unfair. How does the traditional theory of consumer behavior treat this situation?
A) By adjusting the budget line
B) By shifting an indifference curve
C) By modifying the equal marginal principle
D) None of the above. The basic theory does not account for this type of situation.
Price Increase
A rise in the cost of goods or services in the market.
Traditional Theory
This term encompasses theories that rely on established norms and practices, often contrasting with modern or contemporary theories.
Budget Line
All combinations of goods for which the total amount of money spent is equal to income.
- Gain insight into the essential concepts of behavioral economics and identify how it contrasts with orthodox economic paradigms.
- Realize the limitations of basic consumer theory in addressing complex real-world situations.
Verified Answer
NA
norhan ahmedJul 09, 2024
Final Answer :
D
Explanation :
The traditional theory of consumer behavior assumes that individuals make rational choices based on their preferences and budget constraints. It does not consider how ethical or moral considerations may influence consumer behavior. Therefore, the theory does not account for situations where a consumer chooses not to purchase a good based on a perceived unfair price increase.
Learning Objectives
- Gain insight into the essential concepts of behavioral economics and identify how it contrasts with orthodox economic paradigms.
- Realize the limitations of basic consumer theory in addressing complex real-world situations.