Question :
31) When the price of audio books, a normal good, : 1387691
31) When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to
A) the substitution effect.
B) the income effect.
C) the deadweight loss effect.
D) the elasticity effect.
32) When the price of summer tank tops falls and you buy more of them because they are relatively less expensive, this is called
A) the substitution effect.
B) the income effect.
C) the deadweight loss effect.
D) the elasticity effect.
33) The substitution effect of an increase in the price of Raisin Bran refers to
A) the decrease in the demand for Raisin Bran when its price rises.
B) the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left.
C) the fact that the higher price of Raisin Bran lowers consumer’s purchasing power, holding money income constant.
D) the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, cause consumers to buy less Raisin Bran.
34) The income effect of an increase in the price of salmon
A) is the change in the demand for salmon when income increases.
B) refers to the relative price effect—salmon is more expensive compared to other types of fish—which causes the consumer to buy less salmon.
C) refers to the effect on a consumer’s purchasing power which causes the consumer to buy less salmon, holding all other factors constant.
D) is the change in the demand for other types of fish, say trout, that result from a decrease in purchasing power.
35) If the price of lattes, a normal good you enjoy, falls,
A) the income and substitution effects offset each other but the price effect leads you to buy more lattes.
B) both the income and substitution effects lead you to buy more lattes.
C) the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more latte purchased.
D) the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more latte purchased.
36) If the price of muffins, a normal good you enjoy, rises,
A) the income and substitution effects offset each other, but the price effect leads you to buy fewer muffins.
B) both the income and substitution effects lead you to buy fewer muffins.
C) the substitution effect which causes you to decrease your muffin consumption outweighs the income effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased.
D) the income effect which causes you to decrease your muffin consumption outweighs the substitution effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased.
37) The demand curve for corn is downward sloping. If the price of corn, an inferior good, falls,
A) the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded.
B) the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded.
C) both the income and substitution effects reinforce each other to increase the quantity demanded.
D) the income and substitution effects offset each other, but the price effect of an inferior good leads you to buy less corn.
38) The demand curve for canned peas is downward sloping. If the price of canned peas, an inferior good, rises,
A) the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded.
B) the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in quantity demanded.
C) both the income and substitution effects reinforce each other to decrease the quantity demanded.
D) the income and substitution effects offset each other, but the price effect of an inferior good leads you to buy more canned peas.
39) Consider a downward-sloping demand curve. When the price of an inferior good increases, the income and substitution effects
A) work in the same direction to increase quantity demanded.
B) work in the same direction to decrease quantity demanded.
C) work in opposite directions, and quantity demanded increases.
D) work in opposite directions, and quantity demanded decreases.
40) Consider a downward-sloping demand curve. When the price of an inferior good decreases, the income and substitution effects
A) work in the same direction to increase quantity demanded.
B) work in the same direction to decrease quantity demanded.
C) work in opposite directions, and quantity demanded increases.
D) work in opposite directions, and quantity demanded decreases.
41) Consider a downward-sloping demand curve. When the price of a normal good increases, the income and substitution effects
A) work in the same direction to increase quantity demanded.
B) work in the same direction to decrease quantity demanded.
C) work in opposite directions, and quantity demanded increases.
D) work in opposite directions, and quantity demanded decreases.
42) Consider a downward-sloping demand curve. When the price of a normal good decreases, the income and substitution effects
A) work in the same direction to increase quantity demanded.
B) work in the same direction to decrease quantity demanded.
C) work in opposite directions, and quantity demanded increases.
D) work in opposite directions, and quantity demanded decreases.
