Exam 10: Consumer Choice and Behavioral Economics

Figure 10-1 -Refer to Figure 10-1.When the price of hoagies increases from $5.00 to $5.75, quantity demanded decreases from Q₁ to Q₀.This change in quantity demanded is due to

Many people leave their servers tips in restaurants, even when they are not likely to visit the restaurant again.This is evidence that

What is the endowment effect?

The word "util" has been used by economists in the past as an objective measure of utility.Today economists believe that

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good, with an income effect larger than its substitution effect, a good must be ________ and make up a ________ portion of a consumer's budget.

Figure 10-3 Bettye Babylon does not charge admission to her arboreal estate, the Hanging Gardens. Due to space limitations, Bettye only allows 200 visitors per day at her estate. The figure represents the supply and demand for admission to the Hanging Gardens. -Refer to Figure 10-3.At a price of ________, there is neither a shortage nor surplus of tickets.

Figure 10-3 Bettye Babylon does not charge admission to her arboreal estate, the Hanging Gardens. Due to space limitations, Bettye only allows 200 visitors per day at her estate. The figure represents the supply and demand for admission to the Hanging Gardens. -Refer to Figure 10-3.The economically efficient price to charge for admission to the Hanging Gardens is

A Giffen good could be either a normal good or an inferior good.

A change in the price of a good has two effects on the quantity consumed.What are these effects?

Jamal, Lawson, and Kyle have been standing in line for almost an hour waiting to be served at Kirala, a popular new Japanese restaurant.It is possible that some of the people in line won't be served at all before the restaurant closes.Which of the following could explain why the restaurant does not simply raise prices high enough to eliminate the lines? A.In situations where consumption takes place publicly, demand for the product is also influenced by how many other people are buying the product.Consequently, a popular restaurant that increased its prices enough to eliminate lines might find that it had also eliminated its popularity. B.Firms may sometimes not raise their prices for fear that it violates people's sense of fairness and might alienate customers. C.The demand for restaurant meals is relatively elastic and if the firm raises prices it will lower its profits.

The substitution effect of a price increase causes a decrease in the quantity of an inferior good demanded.

Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because

Which of the following statements describes economists' attitudes regarding the influence of social factors on the choices consumers make?

An economist observes two consumers in a supermarket.One of the consumers buys a case of Coca-Cola and the other buys a case of Pepsi-Cola.Both colas sell for the same price and the ages and incomes of the consumers are also the same.Based on this information, how would the economist explain the consumers' choices?

Figure 10-8 Manuri has $300 to spend on Pilates classes and Yoga classes. The price of a group Pilates class is $20 and the price of a group Yoga class is $10. Manuri's optimal bundle is given by "A" in Figure 10-8. -Refer to Figure 10-8.Suppose the price of Pilates sessions rise to $30 while income and the price of Yoga sessions remain unchanged.The income effect of this price change is represented by the movement from

Figure 10-6 -Refer to Figure 10-6.Which of the following statements is true?

Figure 10-1 -Refer to Figure 10-1.Which of the following statements is true?

Article Summary The use of celebrity endorsements can be a good way to promote a brand, as long as the brand fits the celebrity. The article discusses three reasons why a company should use celebrity endorsements: 1. Celebrities have a large range of followers, giving them the ability to build brand equity which created product differentiation to consumers. 2. Companies can reach a global audience since celebrities have worldwide fan bases, and an endorsement can link the product to a celebrity's skills, making fans feel closer to and more like the celebrity. 3. Celebrity endorsements increase consumers' awareness of a product, since consumers are more likely to remember an ad linked to a celebrity. However, not all celebrities are the right fit for all products. Endorsements can backfire if the celebrities are promoting something they would never use, giving the impression of nothing more than a sponsored advertisement. Source: Erika Warne, "Why Brands Should Use Celebrity Endorsements," weareanthology.com, April 20, 2017. -Refer to the Article Summary.Economists refer to an increase in sales due to celebrity endorsements as being the result of

Economists have used the ultimatum game and the dictator game in experiments designed to determine

Along a downward-sloping linear demand curve