A Consumer's Behavior Was Observed in Three Situations with Different

question 31

Multiple Choice

A consumer's behavior was observed in three situations with different prices and incomes.In situation 1, she chose a bundle that cost $1,600.In situation 2, she chose a bundle that cost $2,500.In situation 3, she chose a bundle that cost $3,100.The bundle purchased in situation 2 would cost $1,200 at situation 1 prices.The bundle purchased in situation 3 cost $2,000 at situation 2 prices.This consumer's behavior is known to satisfy the strong axiom of revealed preference.Therefore, the bundle purchased in situation

• A)1 must cost less than $3,100 at situation 3 prices.
• B)3 must cost at least $3,100 at situation 1 prices.
• C)1 can not cost less than $3,100 at situation 3 prices.
• D)2 must cost at least $3,100 at situation 1 prices.
• E)None of the above.

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Definitions:

Accrued Interest

Interest that has been incurred but not yet paid, reflecting the cost of borrowing over a period of time.

Face Value

The nominal value printed on a financial instrument like a bond or stock certificate, representing its legal value.

Issuance Price

The price at which a company's securities are made available for sale when they are first offered to the public.

Carrying Amount

The book value of an asset as recorded in an entity's financial statements, calculated as the original cost minus accumulated depreciation or amortization.