A fall in the price of a good increases the real income or purchasing power of consumers so that they are able to buy more of the product. This statement best describes:
A) the income effect.
B) a complementary good.
C) the substitution effect.
D) an inferior good.
Ans: A) the income effect.
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According to the permanent income hypothesis, permanent income is to ________ as transitory income is to ________
A) consumption; saving B) certain; hypothetical C) wealth; gambling D) saving; borrowing
A mechanism for reallocating risk is:
A. risk premiums. B. dividend pooling. C. diversification. D. All of these are mechanisms for reallocating risk.
The amount of unemployment that a country typically experiences is a determinant of its standard of living
a. True b. False Indicate whether the statement is true or false
Iceland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Lavaland can produce 24 units of food per year or 12 units of clothing. Which of the following is true?
A. Iceland has both a comparative and absolute advantage in producing food. B. Iceland has a comparative advantage, but not an absolute advantage in producing food. C. Lavaland has both a comparative and absolute advantage in producing clothing. D. None of the above are true.