A Typical Consumer Consumes Both Coffee and Donuts

question 59

True/False

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, coffee is a normal good, but donuts are an inferior good.

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Definitions:

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a given person's mind when evaluating a specific topic, concept, method or decision.

Simulation Heuristic

A cognitive process where individuals predict outcomes based on how easily they can imagine an alternative scenario.

Attention Bias

The tendency of an individual's perception to be affected by their recurring thoughts at the expense of other stimuli.

Representativeness Heuristic

The tendency to make judgments about group membership based on physical appearances or the match between a person and one’s stereotype of a group rather than on available base rate information.