Question

Which of the following statements demonstrates that economic agents rationally respond to incentives?

A) when citrus fruits become more expensive,

people don’t change their demand for it because we

need vitamin C.

B)Although it is cheaper to install security monitoring equipment than allowing burglaries to happen most people don’t install it.

C)When the price of iOS phones goes up, people may consider buying Android phones.

D) More efficient batteries allow us to charge cell

phones less often.

Answer 1

When price of a good increases then rational economic agents generally reduces their quantity demanded for such good or substitute such good for cheaper alternative.

Secondly, rational economic agents always prefer good with higher efficiency relative to the good that has lower efficiency.

Thirdly, rational economic agents take decisions on the margin. If the marginal cost of decision exceeds the marginal benefit of decision then the decision is not taken other wise taken.

So,

The correct answer is option (B), (C), and (D).