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?

Statement A and B

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

Explanation:

In economics, it is assumed that economic agents or people are rational, and so therefore, based on their knowledge of cost and benefits, they would make the best decisions that would help the maximize their goals and objectives. One of these common goals is making a choice that will cost less in the long run, and as a result of this, economic agents will respond to economic incentives.

Taking a look at the statements given in the above question, we can clearly tell, statement A and B demonstrate that economic agents respond to incentive.

choices : )

explanation:

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.