The demand curve for canned peas is downward sloping. If the price of canned peas, an inferior good, rises, then
A) the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded.
B) the income and substitution effects offset each other but the price effect of an inferior good leads you to buy more canned peas.
C) both the income and substitution effects reinforce each other to decrease the quantity demanded.
D) the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in quantity demanded.
D
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Under a system of rent controls, landlords are more likely to
A) discriminate against middle aged tenants. B) discriminate against students. C) discriminate against wealthy tenants. D) experience high vacancy rates. E) maintain apartments in better condition.
Hector's wealth is zero, he expects to work for another 45 years at a constant salary of $80,000 and live for another 60 years. If yearly taxes are $20,000 and Hector completely smooths consumption over his lifetime, his annual consumption is
A) $37,500. B) $45,000. C) $60,000. D) $70,000.