The change in the quantity consumed that is caused by a change in real income, with the relative prices held constant, refers to the:
A. substitution effect.
B. income effect.
C. equimarginal rule.
D. law of diminishing marginal utility.
Answer: B
You might also like to view...
An increase in the interest rate is an increase in the opportunity cost of consuming in the future.
Answer the following statement true (T) or false (F)
Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product increases. Which of the following statements accurately predicts the resulting increase in price?
A) The more elastic the supply curve, the greater the price increase. B) The increase in price is not affected by the elasticity of the supply curve. C) The more elastic the supply curve, the smaller the price increase. D) There will be no increase in price if the supply curve is perfectly inelastic.
Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus
Indicate whether the statement is true or false
When economic profits in a perfectly competitive industry are positive
A) new firms will be attracted to the industry, and economic profits will decline to zero. B) the industry is in equilibrium. C) firms will increase output to earn even higher profits. D) firms will increase prices while they have the opportunity.