Related to the Economics in Practice on P

question 34

Multiple Choice

Related to the Economics in Practice on p. 125: Suppose Store ABC runs an ad claiming to have "low prices everyday." They even demonstrate that the total expenditure for a basket of groceries is less at their store than at any of their competitors. Which of the following statements is not true?

• A) You would clearly be better off shopping at Store ABC.
• B) Your preferences may not be consistent with the basket used by Store ABC (in their example), thus it is not clear whether or not you would be better off shopping at Store ABC or not.
• C) Even if your preferences are generally consistent with the basket used by Store ABC, it may still be possible for you to substitute other similar goods for those in the basket used by Store ABC (in their example) and thus spend less at another store.
• D) All of the above statements are true.

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Definitions:

Lump Sum

A one-time payment for the total amount due, rather than breaking the payment into smaller installments.

Sales Tax

A tax paid to a governing body for the sales of certain goods and services, usually added to the price of the goods or service.

Indifference Curve

An indifference curve is a graph that shows a combination of two goods that give a consumer equal satisfaction and utility.

Normal Good

A good for which demand increases when income increases and falls when income decreases, all other factors being equal.