As a result of a decrease in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of
A. consumer sovereignty.
B. the substitution effect.
C. diminishing marginal utility.
D. the income effect.
Answer: D. the income effect.
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Determining “what ought to be” in the economy is considered
a. positive economics. b. normative economics. c. distributive economics. d. mesoeconomics.
A sign that Country A is under pressure to appreciate its currency is its:
a. Overall balance is in surplus. b. Financial account is in surplus. c. Overall balance is in deficit. d. Reserves account is in surplus (i.e., positive). e. All of the above.
Which of following is NOT true of the equilibrium price?
A. It measures the value of the last unit sold to consumers. B. Buyers who are willing to pay the equilibrium price can acquire the good. C. Sellers who are willing to accept the equilibrium price can sell what they produce. D. It is fair in the sense that everyone can afford basic goods and services.
Consumers of the exportable product in the exporting country are most likely to gain when trade is based on
A. increasing-cost industries. B. technological differences. C. external scale economies. D. different factor endowments.