According to the substitution effect, if the price of a product goes down
A. the consumer will not change the level of purchases of the good when the price changes, making the demand curve a vertical line.
B. the consumer will buy more of the good at the lower price than at a higher price, creating a downward sloping demand curve.
C. the consumer will buy more of the good at a lower price than at a higher price, creating a horizontal demand curve.
D. the real income of the consumer will increase, causing the consumer to want to buy more of the good, creating a downward sloping demand curve.
Answer: B
You might also like to view...
Suppose the federal government implemented a flat tax to replace the income tax, and the flat tax saved taxpayers a total of $5 billion. A tax change such as this could be viewed as an example of the federal government implementing
A) contractionary monetary policy. B) contractionary fiscal policy. C) expansionary monetary policy. D) expansionary fiscal policy.
The more complicated the process used to produce a good,
a. the greater are the transaction costs of organizing production through markets b. the lower are the transaction costs of organizing production through markets c. the less likely a firm will use administrative controls to organize the production process d. the more likely a firm will use the market to organize the production process e. the more likely consumers will choose to purchase the good over other alternatives in the market