According to the substitution effect, if the price of a product goes down
A) the consumer will buy more of the good at the lower price than at a higher price, creating a downward sloping demand curve.
B) the consumer will buy more of the good at a lower price than at a higher price, creating a horizontal demand curve.
C) the consumer will not change the level of purchases of the good when the price changes, making the demand curve a vertical line.
D) the real income of the consumer will increase, causing the consumer to want to buy more of the good, creating a downward sloping demand curve.
Answer: A
You might also like to view...
The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 200, where W is the annual wage of a coal miner and Q is the number of people who would accept employment as a coal miner. What is the coal mine's marginal expenditure when it hires 100 coal miners?
A. $15,000 B. $20,000 C. $10,000 D. $1,000,000
Compare and contrast the recent recession with the Great Depression.
What will be an ideal response?
A decrease in the price of foreign oil will affect the U.S. economy by
a. increasing aggregate demand. b. decreasing aggregate demand. c. increasing aggregate supply. d. decreasing aggregate supply.
An example of stimulus spending by the government might be:
A. the monthly payments a government agency makes to its employees. B. increase in government purchases of new cars. C. the FED engaging in open market sales of securities. D. a cut in the government budget aimed at spurring private consumption.