Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-When attempting to explain why a consumer purchases a Ford automobile instead of a Honda automobile, or a Compaq computer instead of an IBM computer, an economist would assert:
A)that the consumer is making a decision based on what gives him maximum utility.
B)that everyone knows Hondas are superior to Fords; the consumer cannot possibly be maximizing his utility.
C)that everyone knows IBM computers are superior to Compaq computers; the consumer may be maximizing his utility at the margin, but is not maximizing total utility.
D)that there is no standard explanation for consumer choices because consumers have varied tastes and preferences.
E)that since rationality is bounded by lack of information, a consumer purchases goods based on convenience rather than on utility maximization.

Question

Quizplus · Accepted Answer

Economists believe that consumers make rational choices based on their preferences and budget constraints in order to maximize their utility, which is the satisfaction they derive from consuming goods and services. Therefore, the economist would assert that the consumer is making a decision based on what gives him or her maximum utility.

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation