Consider a Consumer Who Purchases Two Goods, X and Y

question 130

Multiple Choice

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

• A) cause the consumer to buy more of good Y and less of good X.
• B) cause the consumer to buy more of good X and less of good Y.
• C) not affect the amount of goods X and Y that the consumer buys.
• D) result in an upward-sloping demand for good Y because of the substitution effect.

---

Definitions:

Availability Heuristic

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

Representativeness Heuristic

The representativeness heuristic is a cognitive bias where people judge the probability of an event or the likelihood of an object belonging to a category by how much it resembles a typical case.

Heuristics

Cognitive shortcuts or rules of thumb that simplify decision making, often used unconsciously.

Effortful Thinking

The cognitive processing that requires a deliberate, conscious effort to solve complex problems or to gain new insights.