Question

An individual unit who takes decisions relating to its own consumption is

• A. Household
• B. Firm
• C. Government
• D. External sector

Hint:

Households are the key economic agents responsible for consumption decisions, while firms focus on production and governments make policy decisions.

Answer 1

The Correct Option is A

Step 1: Understanding the individual unit.
In economics, the household is the basic unit that makes consumption decisions, as they decide how to allocate their income to purchase goods and services.
Step 2: Explanation of other options.

• (A) Household: Correct. Households are the individual decision-makers that determine consumption based on their income.
• (B) Firm: Incorrect. Firms make production decisions, not consumption decisions.
• (C) Government: Incorrect. The government makes decisions about fiscal and monetary policies, not individual consumption.
• (D) External sector: Incorrect. The external sector refers to international trade and investment, not individual consumption decisions.

Step 3: Conclusion.
Thus, the individual unit that takes decisions related to its own consumption is the household. Final Answer: Household.