The substitution effect of a price change refers to
A) the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes.
B) the shift of a demand curve when the price of a substitute good changes.
C) the movement along the demand curve due to a change in purchasing power brought about by the price change.
D) the shift in the demand curve due to a change in purchasing power brought about by the price change.
Answer: A
You might also like to view...
Compared to a direct cash transfer payment of an identical amount, food stamps make individuals who desire less food than the value of the food stamps _____
a. better off b. worse off c. indifferent between food and all other goods d. prefer food too all other goods on the margin
The use of the same cost of capital (risk adjusted discount rate) for all capital projects in a corporation
A) is usually the correct procedure. B) is incorrect since different divisions of the corporation may be faced with different levels of risk. C) is incorrect since different capital projects, even in the same division, may be faced with different levels of risk. D) Both B and C