Assume peanut butter and jelly are complements. Ceteris paribus, an increase in the price of peanut butter will cause the equilibrium price of jelly to
A. Decrease and the equilibrium quantity of jelly to decrease.
B. Increase and the equilibrium quantity of jelly to decrease.
C. Decrease and the equilibrium quantity of jelly to increase.
D. Increase and the equilibrium quantity of jelly to increase.
Answer: A
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Indicate whether the statement is true or false
Suppose that the interest rate paid to savers increases. As a result, Tom wishes to save more. This suggests that, for Tom,
A) the substitution effect is greater than the income effect. B) the income effect is greater than the substitution effect. C) utility maximization is not occurring. D) future consumption is a luxury.
Just as resources are scarce for the individual,
a. they are also scarce for the economy as a whole b. they are never scarce for the economy as a whole c. they are randomly abundant for other individuals d. there will be zero resources available for the economy as a whole e. the economy a whole is never faced with having to make rational choices about using resources
Sam's income elasticity of demand for Product A is 1.15, while his income elasticity of demand for Product B is –1.15 . Given these values, what will happen to Sam's consumption of Products A and B if his income increases by 12 percent? a. Sam's consumption of Product A will fall, while his consumption of Product B will rise
b. Sam's consumption of Product A will rise, while his consumption of Product B will fall. c. Sam's consumption of Product A will fall, while his consumption of Product B will remain the same. d. Sam's consumption of Product A will remain the same, while his consumption of Product B will fall.