Marginal Utility Theory Predicts That an Increase in Income Means

question 66

Multiple Choice

Marginal utility theory predicts that an increase in income means that the consumption of

• A) all goods will increase.
• B) normal goods will increase and consumption of inferior goods will decrease.
• C) inferior goods will increase and consumption of normal goods will decrease.
• D) None of the above answers is correct.

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Definitions:

Cognitive Dissonance

A psychological state in which an individual experiences discomfort due to holding conflicting cognitions, such as beliefs, attitudes, or values.

Validity Effect

The tendency of people to believe that a statement is true or valid simply because it has been repeated many times.

Fundamental Attribution Error

The tendency to overemphasize personality traits and underestimate situational factors when explaining other people's behavior.

Cognitive

Relating to mental activities involved in the acquisition, processing, storage, and retrieval of information.