Question
51. Lancaster introduced a model of multi-attribute goods (illustrated above) that borrowed from production theory and viewed consumption as an activity involving the combination of
51. Lancaster introduced a model of multi-attribute goods (illustrated above) that
borrowed from production theory and viewed consumption as an activity
involving the combination of the attributes of goods to desired result. In
the graphic, there are two characteristics (z1 and z2), four goods vectors (1-4)
embodying those characteristics in varying proportions, and a set of six budget
lines connecting each pair of vectors that represent the relative prices of the
goods. Which statement(s) is (are) true:
a. The efficient frontier of consumption is described by the three solid
budget lines that connect the adjacent pairs of goods vectors
b. The three dotted budget lines that connect non-adjacent vectors represent
inferior trade-offs compared to the solid lines since for any point on a
dotted line the consumer could acquire at least as much of one good and
more of another by operating on the relevant solid budget line
c. As depicted, the elimination of a goods vector between any existing pair,
(e.g. going from four to three vectors) will diminish the choices and
decrease potential consumption efficiency due to the contraction of the
efficient frontier
d. All of the above are true
2 Characteristic Z1 Characteristic Z2 51. Lancaster introduced a model of multi-attribute goods (illustrated above) that borrowed from production theory and viewed consumption as an activity involving the combination of the attributes of goods to create a desired result. In the graphic, there are two characteristics (21 and z2), four goods vectors (1-4) embodying those characteristics in varying proportions, and a set of six budget lines connecting each pair of vectors that represent the relative prices of the goods. Which statement(s) is (are) true: a. The efficient frontier of consumption is described by the three solid budget lines that connect the adjacent pairs of goods vectors b. The three dotted budget lines that connect non-adjacent vectors represent inferior trade-offs compared to the solid lines since for any point on a dotted line the consumer could acquire at least as much of one good and more of another by operating on the relevant solid budget line c. As depicted, the elimination of a goods vector between any existing pair, (e.g. going from four to three vectors) will diminish the choices and decrease potential consumption efficiency due to the contraction of the efficient frontier d. All of the above are trueStep by Step Solution
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