Sam Has $200 a Month to Spend on Two Normal

question 134

Multiple Choice

Sam has $200 a month to spend on two normal goods-tanning sessions and rounds of golf. Tanning sessions are $20 each, and a round of golf is $40. Sam currently consumes six tanning sessions and two rounds of golf each month. If the price of a round of golf drops to $20, the income effect predicts that Sam will:

• A)increase his consumption of both rounds of golf and tanning sessions.
• B)double his consumption of rounds of golf.
• C)consume more rounds of golf and fewer tanning sessions.
• D)consume fewer rounds of golf and more tanning sessions.

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Definitions:

Goal Hierarchies

The organization of desired outcomes in a prioritized structure, reflecting the importance or urgency of achieving each goal.

Self-Regulation

Self-regulation is the ability to manage and control one's own emotions, thoughts, and behaviors in accordance with personal goals and societal norms.

Temporal Discounting

The tendency to value immediate rewards more highly than future rewards, influencing decision-making and impulse control.

Short-Range Decisions

Choices or judgments made with immediate or near-term outcomes in mind, often without regard to long-term implications.