The substitution effect suggests that, when consumers judge product quality by price, they will substitute high-priced products for low-priced products.
a. true
b. false
Answer: b. false
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Refer to Figure 7.1. At what level of output are average total cost, average cost, average fixed cost and marginal cost increasing?
A) Q2 B) Q3 C) Q4 D) Q5 E) none of the above
If net taxes decrease by $500 billion, both household disposable income and consumption spending will increase by $500 billion
a. True b. False
If the Federal Reserve wanted to change the money supply in the economy, it would be least likely to:
A. buy bonds on the open market. B. sell bonds on the open market. C. change the level of reserves required to be held by banks. D. change the federal funds rate.
Refer to the diagram. If the budget line shifts from ab to ac, the:
A. price of K has increased.
B. consumer's money income has fallen.
C. price of K has decreased.
D. price of J has increased.