The ______ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price.
a. income effect
b. substitution effect
c. backward-bending supply curve
d. preferences effect
Answer: b. substitution effect
You might also like to view...
The White House's deficit commission has proposed several ways for the government to reduce the federal budget deficit, including freezing salaries of federal workers
Other things equal, freezing salaries of federal workers would tend to ________ the opportunity cost of leisure and ________ the supply of labor. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
Refer to the game between James and Theodore depicted in Figure 12.1. Which of the following is true?
A. If James chooses Up, Theodore's best response is to choose Right.
B. If James chooses Down, Theodore's best response is to choose Right.
C. If Theodore chooses Left, James's best response is to choose Up.
D. If Theodore chooses Right, James's best response is to choose Up.
The lack of success among monopolistic competitive and oligopolistic firms to become monopolies can be attributed primarily to
a. lack of business skills b. lack of financing c. failure to maximize profit d. inability to establish effective barriers to entry e. inefficient production methods
For which of the following products is social influence likely to have the greatest impact?
A) toothpaste B) restaurants C) high-blood pressure medication D) school textbook