Suppose Lois usually buys two cups of coffee for two dollars each and one scone for two dollars each. If the price of scones falls to one dollar each and she now buys two cups of coffee and two scones, this illustrates the
A. substitution effect.
B. marginal rate of substitution.
C. real-income effect.
D. total utility effect.
Answer: C
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Your textbook uses supply and demand curves together to illustrate
A) the level of output needed by individuals. B) the level of output needed by society. C) how economists are necessary to make markets to work effectively. D) how market prices play a key role in coordinating the plans of sellers and buyers. E) all of the above.
Prior to agreeing to join NAFTA, Mexico had followed a free trade policy for more than 30 years
Indicate whether the statement is true or false
Positive externalities exist any time the social costs of producing a good or service exceed the private costs
a. True b. False Indicate whether the statement is true or false
If an oligopolist cuts the prices of its products,
A. customers will switch to a rival firm. B. customers will remain unchanged in number. C. customers will switch from rival firms to buy from them. D. rival firms will not react.