Multiple Choice
Why do people typically purchase insurance policies in the context of consumer surplus and willingness to pay?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
Multiple Choice
Which of the following is NOT an example of a personal consumption expenditure?
A
An individual buying a new smartphone for personal use
B
A family paying for a vacation rental
C
A business acquiring office furniture for its employees
D
A household purchasing groceries at a supermarket
Verified step by step guidance1
Step 1: Understand the concept of personal consumption expenditures (PCE). PCE refers to the value of goods and services purchased by households for their own use, including durable goods, nondurable goods, and services.
Step 2: Identify the nature of each option in the problem. Determine whether the purchase is made by a household for personal use or by a business for operational purposes.
Step 3: Analyze the first option: An individual buying a new smartphone for personal use. Since this is a household purchasing a durable good for personal use, it qualifies as a personal consumption expenditure.
Step 4: Analyze the second option: A family paying for a vacation rental. This is a household paying for a service for personal enjoyment, so it also counts as a personal consumption expenditure.
Step 5: Analyze the third option: A business acquiring office furniture for its employees. This purchase is made by a business for operational use, not by a household for personal consumption, so it is NOT a personal consumption expenditure.
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