You Explain to Your Roommate Surya, Who Makes Beaded Headbands

question 163

Multiple Choice

You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices.She contends that the theory is incorrect because over the past two years she has lowered the price of her headbands and yet has seen a decrease in sales.How would you respond to Surya?

• A)Surya is right; she has evidence to back her claim. The theory must be erroneous.
• B)Surya is making the mistake of assuming that correlation implies causation.
• C)I will explain to her that she is making the error of reverse causality: it is the decrease in demand that has caused her to lower her prices.
• D)I will explain to her that there are some omitted variables that have contributed to a decrease in her sales such as changes in income.

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Definitions:

Social System

An organized and interdependent constellation of institutions, groups, and norms that collectively shapes the behaviors and relationships of individuals within a society.

Duty to Society

The responsibility of individuals and organizations to act in the best interests of the community at large, contributing positively to the welfare of others.

Social Contract

A theoretical agreement within a society or between the governed and the government, defining and limiting the rights and duties of each.

Relativist

An individual or doctrine emphasizing the belief that points of ethical and moral significance are relative to individual cultures or personal perspectives.