If the price of grapefruit rises, the substitution effect due to the price change will cause
A) a decrease in the demand for oranges, a substitute for grapefruit.
B) a decrease in the quantity of grapefruit demanded.
C) a decrease in the quantity of grapefruit supplied.
D) a decrease in the demand for grapefruit.
B
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Economists have shown that the burden of a tax is the same whether the tax is collected from the buyer or the seller. Why, then, are gasoline and cigarette taxes imposed on sellers?
A) It is more difficult for buyers to keep track of their purchases, and for the government to verify that the right of amount of tax revenue is collected. B) Sellers are more honest than buyers. C) The demand for both gasoline and cigarettes is very elastic. D) The Equal Protection Clause of the U.S. Constitution prohibits the government from imposing taxes like these on buyers.
Using Figure 1 above, if the aggregate demand curve shifts from AD2 to AD1 the result in the long run would be:
A. P4 and Y1. B. P4 and Y2. C. P5 and Y1. D. P5 and Y2.
To guide a person through complicated decisions such as whether to get a particular credit card, behavioral economists advocate electronic disclosure in which characteristics such as late fees and high interest rates would be explained clearly. They call this type of nudge a(n):
A. encouragement nudge. B. information nudge. C. pricing nudge. D. advantageous default option nudge.
What would cause a bank run?
A. Borrowers feel that they are being charged too high of an interest rate on their loans. B. Depositors feel that they are earning too low of a return on their deposits. C. Depositors feel that the bank does not have sufficient assets to cover their deposits. D. Bank managers choose to hold more excess reserves.