If a 5 Percent Reduction in the Price of a Commodity

question 230

Multiple Choice

If a 5 percent reduction in the price of a commodity results in a 3 percent increase in the quantity demanded, demand is said to be:

• A) unstable.
• B) price inelastic.
• C) price elastic.
• D) unit price elastic.

Understand the principles of behavioral economics and its distinction from neoclassical economics.

Identify and explain the roles of System 1 and System 2 in decision-making processes.

Recognize various cognitive biases and heuristics that influence human behavior and decision-making.

Analyze the impact of cognitive biases on personal and economic decisions.

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Definitions:

Uncertainty-Identity Theory

A theory suggesting that individuals form or join groups in order to reduce uncertainty about themselves and their place in the world.

System Justification Theory

The theory that negative stereotypes get attached to groups partly because they help explain and justify why some individuals are more advantaged than others.

Terror Management Theory

A theory which says that to minimize fear of mortality, humans strive to sustain faith that they are enduringly valued contributors to a meaningful world and therefore transcend their physical death.

Social Dominance Theory

The theory that large societies create hierarchies and that people tend to endorse beliefs thatlegitimatize that hierarchy.