Melinda considers lattes and coffee to be good substitutes. Suppose the price of milk, a key ingredient used to produce lattes, falls. According to the income effect, which of the following is most likely to occur?
A. Melinda will purchase fewer lattes and more coffee.
B. Melinda will purchase more lattes and less coffee.
C. Melinda will purchase more of most goods due to her higher real income.
D. Melinda's demand curve will decrease (shift in), causing her to purchase fewer lattes.
Answer: C
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A) the Apple Watch and the Samsung Gear S2 to be substitutes. B) the Apple Watch and the Samsung Gear S2 to be complements. C) the Apple Watch to be a normal good and the Samsung Gear S2 to be an inferior good. D) the Apple Watch to be an inferior good and Samsung Gear S2 to be a normal good.
Present value:
A. is how much an amount of money obtained in the future is worth today. B. does not account for inflation. C. is always greater than the future value of money. D. All of these statements are true.
Utility analysis helps economists determine
A. marginal tax rates. B. how people decide how many units of products to buy. C. interest rates. D. none of the above.
Monetary policy is most likely to result in inflation when the aggregate supply curve is
A. Horizontal and the Fed lowers the reserve ratio. B. Horizontal and the Fed sells securities. C. Vertical and the Fed raises the reserve requirement. D. Vertical and the Fed lowers the discount rate.