The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises
Indicate whether the statement is true or false
TRUE
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If the income elasticity of demand for a good is negative, this means that:
a. only the poor will buy the good. b. as incomes fall, less will be spent on the good. c. as incomes rise, the demand for the good will fall. d. the good does not obey the law of demand.
Consumers buy less of a good as its price increases because
a. production costs have risen. b. substitute goods are now relatively cheaper. c. the income of consumers has effectively risen. d. the higher price will make the good more valuable to each consumer.
A good is considered to be a public good if it
a. is a good produced by the government sector. b. is both nonrival-in-consumption and nonexcludable. c. benefits only a small group of consumers but is very costly to produce. d. is a good whose production is financed by tax revenue.
Diseconomies of scale are caused by the law of diminishing marginal returns.
Answer the following statement true (T) or false (F)