Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of:
A. the proper application of the Cost-Benefit Principle.
B. inconsistent reasoning; saving $20 is saving $20.
C. inconsistent reasoning because prices are sunk costs.
D. rational choice because saving 40% is better than saving 4%.
Answer: B
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If the price of the good measured on the horizontal axis falls, a consumer's budget line
A) becomes flatter. B) becomes steeper. C) shifts rightward and its slope does not change. D) shifts leftward and its slope does not change.
Which of the following statements is correct?
a. Few economic models incorporate assumptions. b. Different economic models employ different sets of assumptions. c. Good economic models attempt to mimic reality as closely as possible. d. Economic models, to be accepted, must be tested by conducting experiments.