Suppose a Consumer Has the Following Rule of Thumb: Regardless

question 11

Multiple Choice

Suppose a consumer has the following rule of thumb: Regardless of how gasoline prices fluctuate, she will always buy $20 of gasoline per week and then adjust her driving patterns accordingly.We can then conclude the following:

• A)Her own-price elasticity of demand is equal to -1.
• B)Her income-elasticity of demand is 0.
• C)Her own-price elasticity is 0.
• D)Her income elasticity of demand is -1.
• E)Both (a) and (b).
• F)Both (a) and (d).
• G)Both (c) and (d)
• H)None of the above.

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Definitions:

Utility Function

Mathematical model that quantifies satisfaction levels consumers receive from consuming various quantities of goods and services, guiding choices under constraint.

Consumer's Surplus

The gap between what consumers are prepared and capable of spending for a product or service and the aggregate sum they end up paying.

Earplugs

Small devices inserted into the ear canal to protect the ears from loud noises, water, foreign bodies, or excessive wind.

Utility Function

A mathematical representation that ranks individuals' or consumers' preferences for a set of goods or services, indicating satisfaction levels.