Suppose all individuals in a group have homothetic tastes. Then we can be sure that the group can be treated as a single representative consumer is if the group members also have identical tastes.
Answer the following statement true (T) or false (F)
True
Rationale: When tastes are homothetic, optimal bundles always lie on the same ray from the origin as income changes. If tastes are also the same for all group members, then optimal bundles lie on the same ray from the origin as income changes -- which means that changes in individual behavior will exactly offset each other as income is redistributed within the group.
You might also like to view...
The tables above show the labor market and the production function schedule for the country of Pickett. Potential GDP is ________
A) $40 trillion B) $9 trillion C) $14 trillion D) $25 trillion
In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if disposable income decreases?
A) Nothing; the economy would remain at point a. B) There would be a movement to a point such as b on supply of loanable funds curve SLF0. C) The supply of loanable funds curve would shift rightward to a curve such as SLF2. D) The supply of loanable funds curve would shift leftward to a curve such as SLF1.