Author Question: Suppose a survey is taken concerning car safety. According to the survey, people strongly desire ... (Read 93 times)

Davideckstein7 · **on:** Jun 29, 2018

Suppose a survey is taken concerning car safety. According to the survey, people strongly desire safer cars and indicate they are willing to pay substantially more for safer cars.

Using this information, one auto firm adds numerous safety features to its car, raising the price by several thousand dollars. Sales drop sharply, and the firm loses profits. What went wrong?

Question 2

Holding money as a medium of exchange to purchase goods and services and make payments is known as the

A) spending demand for money.
B) transactions demand for money.
C) precautionary demand for money.
D) asset demand for money.

rosiehomeworddo · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The automaker was relying on what people say rather than on what they do. An economic model would have tried to predict whether the expected gains from driving safer cars would have been great enough for consumers to pay the higher price. Economic models are models of behavior and not models about how people think or whether people's views directly affect their actions. Also, they did not account for other factors

Answer to Question 2

B