According to the law of demand, as the price of a good rises, _____.
a. buyers purchase more of the good because the higher price reflects an improvement in product quality
b. buyers purchase less of the good because their real income decreases with an increase in price
c. buyers purchase less of the good because they expect prices to fall in the future
d. buyers purchase more of the good because they expect the price of a substitute good to rise
e. buyers purchase more of the good because they expect prices to be even higher in the future
Ans: b. buyers purchase less of the good because their real income decreases with an increase in price
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If substitutes for a good are readily available, the demand for that good
A) does not change substantially if the price rises. B) does not change substantially if the price falls. C) is inelastic. D) is elastic. E) Both answers A and B are correct.
At the beginning of the year, your wealth is $10,000. During the year, you have an income of $90,000 and you spend $80,000 on consumption. You pay no taxes. Your wealth at the end of the year is
A) $20,000.00. B) $0. C) $90,000.00. D) $100,000.00.
An autonomous rise in ________ shifts the LM curve to the ________, everything else held constant
A) net exports; right B) net exports; left C) money demand; right D) money demand; left
Other things being equal, corrective taxation is superior to regulation in the long run because it _____
a. gives the producer an incentive to find a way to reduce external costs b. the tax revenue can be used as compensation c. the tax revenue can be used on other parts of the budget d. is more burdensome on the producers of the externality