At Prices ($4, $12), Harry Chooses the Bundle (9, 4)

question 11

Multiple Choice

At prices ($4, $12) , Harry chooses the bundle (9, 4) .At the prices ($8, $4) , Harry chooses the bundle (2, 9) .Is this behavior consistent with the weak axiom of revealed preference?

• A)Yes.
• B)No.
• C)It depends on his income.
• D)We would have to observe a third choice to be able to say.
• E)None of the above.

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Definitions:

Price

The amount of money required to purchase a good or service; it acts as a signal between sellers and buyers.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit to consumers.

Willingness to Pay

The maximum amount an individual is prepared to spend to acquire a good or service or avoid something undesirable.

Consumer Surplus

The gap between what consumers are prepared to pay for a product or service and what they end up spending.