The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded
Indicate whether the statement is true or false
TRUE
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The income elasticity of demand _____
a. must be negative because of the law of diminishing marginal utility b. could be positive, negative or zero, depending on the nature of the good c. must be positive for all goods because consumers tend to buy more at higher incomes d. is usually zero because "you can only have so much" e. can never be zero
Consumers buy less of a good as its price increases because
a. production costs have risen. b. substitute goods are now relatively cheaper. c. the income of consumers has effectively risen. d. the higher price will make the good more valuable to each consumer.
________: the general price level is rising even though the economy is nowhere near full employment output
Fill in the blank(s) with correct word
Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $6 and a quantity of 40 units. If the government imposes a $2 per-unit tax on this product, the deadweight loss from the tax will be:
A. 80. B. 70. C. 60. D. 10.