If Income Increases and the Demand for Bus Rides Decreases

question 314

Multiple Choice

If income increases and the demand for bus rides decreases,

• A) bus rides are a normal good.
• B) consumers are behaving irrationally.
• C) bus rides are an inferior good.
• D) bus rides are a substitute good.
• E) bus rides must be a complement good with some other good.

Evaluate different scenarios of adverse selection in insurance and labor markets.

Understand the impact of moral hazard in insurance markets.

Ascertain how different mechanisms (such as signaling and screening) can mitigate the problems of adverse selection.

Interpret utility functions and make decisions based on them.

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Definitions:

Par

Par value, often referred to simply as "par," is the face value of a bond or the stock value stated in the corporate charter, not necessarily its market value.

Bond Prices

The amount of money for which bonds are bought and sold in the market, influenced by factors such as interest rates, supply, and demand.

Interest Rates

The expense incurred by a borrower, quantified as a percentage of the principal, for accessing a lender's assets.

Yield

The income return on an investment, such as the interest or dividends received, expressed as a percentage of the investment's cost.