Which of the following best describes the substitution effect caused by a price increase?
a. A change in consumption due to the fact that you will not buy goods whose marginal value is below the new price.
b. A change in consumption due to the fact that you cannot afford your original market basket.
c. A smaller percentage change in quantity than in price.
d. A larger percentage change in quantity than in price.
a. A change in consumption due to the fact that you will not buy goods whose marginal value is below the new price.
You might also like to view...
Everything else equal, a depreciation of the dollar against the yuan:
A) will not affect the quantity of dollars demanded. B) will lead to a decrease in the quantity of dollars demanded. C) will lead to an increase in the quantity of dollars demanded. D) can either lead to an increase or a decrease in the quantity of dollars demanded depending on the magnitude of the depreciation.
When consuming a good creates positive externalities,
a. private demand increases b. private demand decreases c. the private demand curve overstates the marginal social benefit of the good d. the private demand curve understates the marginal social benefit of the good e. the equilibrium quantity increases without government intervention