Multiple Choice
When you compare prices for new tires, how are you using money in this case?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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When money is acting as a store of value, it allows an individual to:
A
measure the opportunity cost of production
B
save purchasing power for future use
C
exchange goods and services directly without using money
D
determine the equilibrium price in a market
Verified step by step guidance1
Understand the concept of money serving as a 'store of value': this means money can be saved and retrieved in the future, retaining its value over time.
Recognize that when money acts as a store of value, it allows individuals to save purchasing power for future use rather than spending it immediately.
Differentiate this function from other functions of money, such as 'medium of exchange' (which facilitates direct exchange of goods and services) and 'unit of account' (which measures value and opportunity cost).
Identify that 'measuring the opportunity cost of production' relates more to the unit of account function, not the store of value function.
Conclude that the correct understanding is that money as a store of value enables saving purchasing power for future use.
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