Nick considers macaroni and cheese to be an inferior good. As a result of macaroni and cheese being an inferior good, the
A) substitution effect must be larger in magnitude than the income effect so that less is purchased as the price falls.
B) substitution effect must be smaller in magnitude than the income effect so that less is purchased as the price falls.
C) income effect is positive, so that more is purchased as income increases.
D) income effect is negative, so that less is purchased as income increases.
D
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Answer the following questions true (T) or false (F)
1. If the demand for a product increases and the supply of the same product decreases, the equilibrium price will increase. 2. If the demand for a product decreases and the supply of the same product increases, the equilibrium quantity will increase. 3. As the number of firms in a market increases, the supply curve will shift to the left and the equilibrium price will rise.
?
In Exhibit 3-16, if the market price of chairs is initially $15, a movement toward equilibrium would require:
A. ?no change, because an equilibrium already exists. B. ?the price to fall below $15 and both the quantity supplied and the quantity demanded to fall. C. ?the price to remain the same, but the supply curve to shift to the left. D. ?the price to fall below $15, the quantity supplied to fall, and the quantity demanded to rise.?