Question

Select the statement below that is true.

• Completeness means that none of the items in a set should be missing.

• The consumer's preference is indicated by the Y axis.

• Non-satiation means that more is always better.

• Indifference means that only a particular combination of goods are preferable to the consumer.

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Which of the following describes what will happen to Peter’s budget constraint on his annual trip to the amusement park when the price of game tokens remains the same as last year but the price of ride tickets decreases?

• The budget constraint will pivot out along the axis with ride tickets.

• The budget constraint will shift to the right, parallel.

• Indifference curves will cross.

• The budget constraint will remain the same.

Answer 1

1) The statement which is true is Non-satiation means that more is always better. The principle of non-satiation holds that more of any or both goods is always better than less.

Completeness means that none of the items in a set should be missing. False. Because completeness means that two bundles can be compared.

The consumer's preference is indicated by the Y axis. False. Because consumer's preference is utility function.

Indifference means that only a particular combination of goods are preferable to the consumer. False. Indifference means two consumption bundles which yield same utility to the consumer.

2) Since the price of ride tickets decreases the maximum number of rides Peter can enjoy increases. So, the budget constraint will pivot out along the axis with ride tickets.