According to the income effect, when the price of a good increases, consumers ______.
a. switch to another similar good
b. buy less of it due to their budget constraints
c. gain less utility from that good
d. experience consumer equilibrium
b. buy less of it due to their budget constraints
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Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as
A. long-run aggregate supply shifting leftward B. Short-run aggregate supply shifting downward C. Aggregate demand shifting rightward D. Aggregate demand shifting leftward
One of the reasons that pollution problems are as large as they are is that
A. markets let individuals and firms deplete valuable resources without charging money for doing so. B. markets are incapable of incorporating valuable resources such as air and pure water. C. governments use resources without paying for them the way that individuals and firms must. D. markets are not an efficient means to address scarcity.
Briefly explain why having a completely clean environment has costs and may not be the best option to pursue.
What will be an ideal response?
How can a firm be made better off by limiting its options?
What will be an ideal response?