Behavioral economics
What influences individuals in decision-making situations and takes them away from rational judgments?
Biases
The law of demand states:
Adecrease in price leads to an increase in quantity demanded
If a housebuilder expects prices to fall next year, what is the most likely supply decision the housebuilder will make?
D.Increase the supply of new housing in the present
A market is in equilibrium when:
A. There is no tendency for price to change
B. Producer profit is maximised
C. Quantity demand is greater than quantity supplied
There is no tendency for price to change
a situation where an insurance company automatically rolls over an individual insurance premium to the following year
Default choice
As the price of smartphones decreases quantity demanded increases because of all of the following except:
B. There is substitution towards smartphones away from tablet computers
C. A lower price means more people can afford a smartphone
D. There is substitution away from smartphones towards tablet computers
There is substitution away from smartphones towards tablet computers
The law of supply states that:
Quantity supplied increases as prices increases
Which of the following statements about the price mechanism is least likely to be true?
A. It provides consumers and producers with information about market conditions
B. It can act as an incentive for consumers to change the quantity they demand for a good
C. It is impossible for the government to influence
C. It is impossible for the government to influence
an example of nudge theory:
A. When a restaurant offers a decoy product on a menu to attract consumers to another meal they want to sell
B. Selling a product at a lower price to increase sales
C. A firm advertises its product extensively to increase sales
When a restaurant offers a decoy product on a menu to attract consumers to another meal they want to sell
Which of the following is unlikely to be a complementary good for a bicycle?
Scooter
What is least likely to lead to an increase in the supply of computer games?
A.Increase in the wages of game designers
B.Improvement in game design technology
C.Decrease in the cost of microchips
Increase in the wages of game designers
Which of the following would be shown on a demand and supply diagram for good X if the market for good X was initially in equilibrium and the demand for good X increased?
A. Excess supply of good X at the new equilibrium price
B. Excess demand for good X at the new equilibrium price
C. Excess supply of good X at the initial equilibrium price
D. Excess demand for good X at the initial equilibrium price
Excess demand for good X at the initial equilibrium price
A business that sells a film streaming service with an annual subscription payment sends a letter to its customers telling them their subscription payment will automatically continue if they ‘do nothing’. What best describes this method of selling by the business?
Default choice
When an individual drinks a third cup of coffee their total utility increases from 20 utils to 25 utils. From the second cup of coffee, their marginal utility is 8 utils. Which of the following is true?
Marginal utility from the first cup consumed was 12 utils
What is true about the supply of oranges?
B. At low prices, orange producers cannot make a profit and will stop producing
C. The higher the price of oranges, the lower the quantity supplied of oranges
D. The higher the price of oranges, the higher the quantity supplied of oranges
The higher the price of oranges, the higher the quantity supplied of oranges
Which of the following best describes the incentive function of price?
A. As prices fall there is less incentive for consumers to buy a good because they receive less utility for each $US they spend
B. When price increases firms can earn more profit from a market and they have the incentive to increase quantity supplied
When price increases firms can earn more profit from a market and they have the incentive to increase quantity supplied
How could Nudge Theory be used by the government to reduce carbon emissions?
Create a league table of companies that emit the most carbon
A government has planned to put a subsidy on electric cars which will cause car prices to fall in 6 months time. What is the most likely outcome on the market for electric cars?
There will be an immediate fall in the demand for electric cars
An improvement in technology in the electric car market is most likely to lead to which of the following?
Market price falls and market output increases
If the price of a complement for a mobile phone increases which of the following is the most likely effect on the equilibrium price and quantity in the mobile phone market?
A. Price increases and quantity increases
B. Price decreases and quantity decreases
C. Price increases and quantity decreases
Price decreases and quantity decreases