An increase in the consumption of a good resulting from a reduction in price that makes the good cheaper in relation to other goods is called the:
a. substitution effect.
b. income effect.
c. real balance effect.
d. inelasticity effect.
a
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Refer to the table above. Laborland has a(n) ________ advantage in ________ shoes
A) comparative; stitching B) absolute; designing C) absolute; stitching D) comparative; both designing and stitching
According to economic theory, the real wage should
a. be greater than the price of the product produced. b. equal the marginal physical product of labor. c. be less than the marginal product of capital. d. decline as productivity rises.
"Hicks' Third Law of Demand" states that "most" goods must be:
a. gross substitutes. b. gross complements. c. net substitutes. d. net complements.
When prices of products are set below equilibrium,
A. society’s resources are inefficiently allocated. B. firms expand output to increase profits. C. firms earn excessively high profits. D. consumers benefit from surpluses of cheap goods.