Which of the following is (are) true?
A) A budget constraint limits what a poor consumer can spend, but there is no similar constraint on rich people.
B) Utility maximization requires seeking the greatest utility from a given budget.
C) In consumer choice theory, we assume all goods and services are normal.
D) All of the above are true.

Question

Quizplus · Accepted Answer

A) This statement is false. Both poor and rich consumers have constraints on their spending. The difference is that the constraint for a poor consumer is more binding, meaning they have less disposable income to spend on goods and services.

B) This statement is true. Utility maximization is the process of selecting the goods and services that provide the greatest satisfaction within a given budget constraint.

C) This statement is false. In consumer choice theory, goods and services can be either normal goods (where demand increases as income increases) or inferior goods (where demand decreases as income increases).

Which of the Following Is (Are) True