Question

Consider the following statements:________

a. Consumers rent more kayaks from a vendor that rents kayaks at a lower price than other rival kayak vendors along Waikiki beach.
b. Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment.
c. Farmers produce more cotton when its selling price falls.
Which of the above statements demonstrates that economic agents respond to incentives?
A. a only.
B. b only
C. c only.
D. a and b.
E. a, b, and c.

Answer 1

D. a and b.

Step-by-step explanation:

Economic agent is defined as a person that makes decisions. Choices are made to better drive business objectives.

In a. above, consumers prefer to rent more kayaks from a vendor that is giving them at lower prices. The consumer is the decision-maker, while the incentive is lower prices.

In b. the department stores make the decision not to install security cameras (which are quite expensive) instead they increase security guards. The incentive here is that of comparably lower cost. It is less costly to have goods shoplifted than to install the cameras.