Which of the following statements is correct?
A)The theory of consumer choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand.
B)The theory of consumer choice provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply.
C)Monetary theory provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply.
D)The theory of public choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand.

Question

Quizplus · Accepted Answer

The theory of consumer choice explains how individuals allocate their income among different goods and services, which in turn affects the demand for those goods and services. The theory of the competitive firm explains how firms determine the quantity of output they will supply at different prices. Therefore, the theory of consumer choice provides a more complete understanding of demand, while the theory of the competitive firm provides a more complete understanding of supply. Option A is incorrect because the theory of consumer choice explains demand, not supply. Option C is incorrect because monetary theory focuses on the role of money in the economy, not demand or supply. Option D is incorrect because the theory of public choice analyzes how individuals and organizations make decisions in the public sector, not supply or demand in the private sector.

Which of the Following Statements Is Correct