What occurs when a price changes and consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price?
a. Budget constraint
b. Consumer equilibrium
c. Substitution effect
d. Income effect
c. Substitution effect
The substitution effect occurs when a price changes and consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price.
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Predatory pricing
A) is extremely hard to document in the U.S. economy today. B) is most often practiced in the retailing industry. C) is not legal under U.S. law but is regularly practiced by foreign firms competing in the United States. D) is principally responsible for the decline of competition in the oil industry.
The market basket approach:
A. gives us a single number that represents how changing prices affect the typical consumer. B. gives us a list of what the typical consumer buys and the average price change of those goods. C. tells us how the prices of all goods and services in an economy change over time. D. tells us exactly how people change what they buy from year to year.
According to the textbook, the income elasticity of demand is:
A about the same in the short run and in the long run. B much smaller in the short run than in the long run. C much larger in the short run than in the long run. D is difficult to differentiate from the short run to the long run.
The productivity standard says
A. that everyone should have exactly the same income. B. that the age-earnings cycle should determine income. C. that people should be compensated on the basis of their need. D. that people should be compensated on the basis of what they produce.