Scenario 5.1 The Demand for Noodles Is Given by the Following Equation

question 32

Multiple Choice

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10.
-Given the above equation, the income elasticity of demand for noodles is _____.

• A)5
• B)0.5
• C)2
• D)2.5
• E)1.6

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Definitions:

Behavioral Economists

Researchers who study the psychological, cognitive, emotional, cultural, and social factors that affect the economic decisions of individuals and institutions.

Endowment Effect

A cognitive bias where individuals value an owned object higher than its market value simply because they own it.

Anchoring Effect

A cognitive bias in decision-making where individuals rely too heavily on the first piece of information (the "anchor") offered when making decisions.

Behavioral Economics

A field of economics that studies the effects of psychological, social, cognitive, and emotional factors on economic decisions.