If We Observe That William's Budget Constraint Has Moved Inward

question 520

Multiple Choice

If we observe that William's budget constraint has moved inward, then we know for certain that

• A)his income must have decreased.
• B)he will be indifferent between goods X and Y.
• C)the price of one or both of the goods must have increased.
• D)his utility will decrease.

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Definitions:

Agency Thinking

The cognitive process that leads individuals to believe they can influence their own actions and the environment around them.

Willpower

refers to the ability to control impulses and delay short-term gratification for long-term objectives.

Commitment

The state or quality of being dedicated to a cause, activity, or goal.

Optimistic Biases

The tendency to believe that we are less likely to experience negative events and more likely to experience positive events compared to others.