You Explain to Your Roommate Surya, Who Makes Beaded Headbands

question 163

Multiple Choice

You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices.She contends that the theory is incorrect because over the past two years she has lowered the price of her headbands and yet has seen a decrease in sales.How would you respond to Surya?

• A)Surya is right; she has evidence to back her claim. The theory must be erroneous.
• B)Surya is making the mistake of assuming that correlation implies causation.
• C)I will explain to her that she is making the error of reverse causality: it is the decrease in demand that has caused her to lower her prices.
• D)I will explain to her that there are some omitted variables that have contributed to a decrease in her sales such as changes in income.

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Definitions:

Free Will

The ability to choose one's actions free from certain constraints, implying a sense of autonomy and responsibility for those decisions.

B. F. Skinner

A renowned American psychologist best known for his work in behaviorism and the development of the theory of operant conditioning.

Behavioural Perspective

An approach in psychology focusing on observable behaviors and the ways in which they're learned through interactions with the environment.

Emotional Reactions

Refers to the psychological responses, including feelings and expressions, to internal or external events.