Suppose a Consumer Buys Two Goods $x$ And $y$ And Has Income of $30

question 54

Multiple Choice

Suppose a consumer buys two goods, $x$ and $y$ and has income of $30. Initially P_x = 3 and P_y = 3 and the consumer chooses basket $A$ with x = 7 and y = 3. The prices change to P_x = 4 and P_y = 2 and the consumer chooses basket $B$ with x = 5 and y = 5.

• A) These choices are consistent with utility maximization.
• B) These choices are not consistent with utility maximization.
• C) With this information it is not possible to determine if these choices are consistent with utility maximization.
• D) Basket B must be preferred to basket A.

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Definitions:

Commission-Based

A compensation structure where payment is based on performance, typically a percentage of sales made or deals closed.

Incentive-Based

Refers to programs or strategies that motivate desired behaviors by offering rewards or benefits as incentives.

Pretests

Preliminary tests or assessments conducted to evaluate the effectiveness or performance of a campaign, product, or strategy before its full-scale launch.

In-House Agency

A marketing or advertising agency that is owned and operated within the company it serves, as opposed to being an external or separate entity.