Two goods are considered substitutes if
a. a decrease in the demand for one leads to a decrease in the supply of the other.
b. an increase in the demand for one leads to a decrease in the supply of the other.
c. an increase in the price of one leads to an increase in the demand for the other.
d. a decrease in the price of one leads to an increase in the demand for the other.
e. a decrease in the supply of one leads producers to switch to production of the other.
C
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Calculate the annual return earned by a lender on a sum of $800 lent out at 8 percent interest, if prices inflate at the rate of 5 percent per annum
a. $909.03 b. $808.50 c. $800.67 d. $907.20
Answer the following statements true (T) or false (F)
1. Inventory depletion can lead to increased production. 2. During the expansion phase of the business cycle, profit margins increase due to a widening cost-price relationship. 3. Population growth and wars are examples of external forces affecting the economy’s cyclical movements. 4. As the economy moves into the trough of the business cycle, there is a sizable reduction in the output of capital goods. 5. The roughly coincident indicators have their upward and downward turning points prior to the upward and downward turning points of real GDP.