Show, Using a Sketch Graph, Why a Consumer Prefers a Cash

question 1

Essay

Show, using a sketch graph, why a consumer prefers a cash gift rather than a larger gift of merchandise.

---

Definitions:

Long-Run Equilibrium

A state in which all factors of production and costs are variable, and firms in the industry are earning only normal profits, with no incentive for entry or exit.

Inferior Good

A good or service whose consumption declines as income rises, prices held constant.

Constant Costs

Costs that remain unchanged regardless of the level of production or activity.

Long-Run Equilibrium

A state in which all firms in a market are making zero economic profit, with no firm having an incentive to enter or exit the industry.