Refer to the Graphs, Where the Subscripts on the Labels

question 49

Multiple Choice

Refer to the graphs, where the subscripts on the labels denote years 1 and 2. From the graphs we can clearly conclude that the economy

• A) is not at full employment in either year.
• B) is at full employment in year 1 but not in year 2.
• C) is at full employment in year 2 but not in year 1.
• D) is at full employment in both years.

---

Definitions:

Revealed Preference

An economic concept referring to the idea that consumers' choices, reflected in their purchasing decisions, reveal their preferences for certain goods or services over others.

Weak Axiom

In economic theory, a principle stating that if a consumer prefers bundle A to bundle B, then they will not prefer B to A when prices change, keeping income constant.

Revealed Preference

A theory suggesting that consumers' preferences can be determined by observing their purchasing behavior and the choices they make among different goods.

Weak Axiom

In the context of consumer choice theory, it is a postulate stating that if a consumer prefers bundle A over bundle B when both are affordable, then she will not choose B when A becomes more affordable.