Refer to Exhibit 4. A consumer has €100 to spend on socks and belts. If each belt costs €10 and each pair of socks costs €5, which point on the graph represents the bundle the consumer will purchase?

Multiple choice question for Consumer Theory vs. Real Consumers. Select an option, then review the explanation below.

Explanation

Given the consumer's budget of €100, with belts priced at €10 and socks at €5, the combination shown at point Z fits within the budget and represents the optimal purchase choice. Points X and Y do not align with the budget constraint, and the graph provides sufficient information to determine the optimal bundle.

Practice related questions from the same subject.

1.Assuming that consumption during youth and old age are both normal goods, how does a rise in the interest rate affect the amount saved?
2.What happens to the budget line if both income and prices double simultaneously?
3.Based on Exhibit 4, assume a consumer has €100 to spend and must decide between purchasing socks or belts. How would you classify a pair of socks in this scenario?
4.Refer to Exhibit 4. Assume a consumer is deciding between purchasing socks and belts, with an income of €100. If the price of socks decreases from €5 to €2 per pair, which movement illustrates the substitution effect?
5.When a rise in a consumer's income leads to a reduction in the amount of a product they buy, how is this product classified?

Refer to Exhibit 4. A consumer has €100 to spend on socks and belts. If each belt costs €10 and each pair of socks costs €5, which point on the graph represents the bundle the consumer will purchase?

Explanation

More Consumer Theory vs. Real Consumers MCQs