According to the substitution effect, a drop in price increases real income (purchasing power), and if the good is normal, consumers will respond by buying more of the good in question. Thus a drop in price increases quantity demanded
Indicate whether the statement is true or false
false
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Which of the following countries is not a member of NAFTA?
A) Canada. B) The United States of America. C) Mexico. D) All three countries form part of NAFTA.
Inflation may impose little, if any, cost on the economy, if ________
A) laws against excessive price increases are enforced effectively B) the government subsidizes menu costs C) price increases are fully anticipated D) the Fisher effect holds true E) the rate of price increase is so slow that people do not feel compelled to alter their behavior
Citizens have a strong incentive to monitor local government because _____
a. as citizens it is their duty to do so b. the level of government services directly affects their utility because they consume them every day c. it is easy to observe the level and quality of nearby governments d. the cost and quality of local government services are reflected in housing prices
If an unregulated monopolist operates in a market, then: a. customers will pay higher prices than if the market were competitive
b. customers will purchase fewer units of output than if the market were competitive. c. society will not be allocating its resources efficiently. d. all of the above will occur.