The substitution effect of an increase in the price of Raisin Bran refers to
A) the decrease in the demand for Raisin Bran when its price rises.
B) the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left.
C) the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran.
D) the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant.
C
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How does aggregate demand curve (AD) differ from an individual demand curve (D)?
A) AD is generally vertical while D is usually downward sloping. B) D represents the price-quantity relationship for a single good or service while AD looks at the entire economic system. C) AD is generally a downward sloping curve while D usually slopes upward. D) Look for D in macroeconomic analyses and for AD in microeconomics.
The marginal propensity to consume (MPC) can best be defined as that fraction of
A) real disposable income that is not consumed. B) a change in real disposable income that is spent. C) a change in real disposable income that is saved. D) real disposable income that is consumed.
The amount of payment necessary to attract a given productive resource away from its best alternative use is the
a. resource cost. b. opportunity cost. c. overhead cost. d. variable cost.
Schumpeter maintains that recessions provide businesspeople with incentives to advance technologically
Indicate whether the statement is true or false