As a result of the decrease in the price of hamburger, consumers buy more hamburger and fewer frankfurters. This is an illustration of:
a. The income effect
b. The substitution effect
c. Consumer sovereignty
d. Changing tastes and preferences
b. The substitution effect
You might also like to view...
Richstone Bakery reduces the price of wheat bread from $2 to $1 and finds that quantity demanded increases from 100 to 120 loaves. Richstone calculates that the price elasticity of demand for wheat bread is (approximately)
a. 0.00 b. 0.30 c. 5.00 d. 10.5 e. 2.00
YearCPI2010952011100201210520131042014106According to the table shown, which year is most likely being used for the base year?
A. 2012 B. 2013 C. 2011 D. 2010
When the CPI increases from one year to the next:
A. the cost of living has decreased. B. people need to spend more money to buy the same amount of goods as the previous year. C. deflation has occurred. D. All of these statements are true.
The rate of discount is best described as the rate of
A) return on physical capital after the cost of capital has been removed. B) return on financial assets after an inflation adjustment has been made. C) interest used to derive the present values of future sums. D) return on financial capital that has not been adjusted for inflation.