The substitution effect argues that a consumer
A) will always use the additional purchasing power from a price decrease to purchase more of both goods.
B) will not purchase more of a good when its price falls.
C) will purchase more of a good that has become relatively cheaper, and less of a good that has become relatively more expensive.
D) will purchase less of both goods if his or her real income increases.
Answer: C
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Based on your answer to part (a), find the profit-maximizing output level for each farmer.
In the competitive market for organic corn, market demand is QD = 340 – 2P and market supply is QS= 100 + 4P, where P is the price per bushel, and Q is market output in thousands of bushels. Each individual farmer faces a marginal cost function of MC = 10 + 3q, where q is the single farmer’s output level in thousands.
A market demand curve measures
A) how much a consumer is willing to pay for an additional unit of the good. B) the marginal social benefit of an additional unit of the good. C) the marginal social cost of an additional unit of the good. D) Both answers A and B are correct.
In the United States, health care spending on people ________ is six times greater than on people ________
A) under age 3; over age 65 B) over age 65; aged 18 to 24 C) aged 18 to 24; 25 to 44 D) over age 65; aged 25 to 44
Any change in the economy that reduces desired national saving for a given value of the real interest rate will shift the desired national saving curve to
A. the right and decrease the real interest rate. B. the left and increase the real interest rate. C. the left and decrease the real interest rate. D. the right and increase the real interest rate.