Suppose Peanut Butter Is an Inferior Good for Ilya and the Price

question 125

Multiple Choice

Suppose peanut butter is an inferior good for Ilya and the price of peanut butter rises.What will happen to Ilya's consumption of peanut butter?

• A)The substitution effect will cause an increase in the consumption of peanut butter.
• B)The substitution effect will cause a decrease in the consumption of peanut butter and the income effect will cause an increase in the consumption of peanut butter.
• C)The substitution effect will cause a decrease in the consumption of peanut butter.
• D)The income effect will cause an increase in the consumption of peanut butter.

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Definitions:

Disposable Income

The amount of money that households have available for spending and saving after income taxes have been accounted for, crucial for understanding consumer behavior and economic health.

Daily Foodstuffs

Basic food items consumed on a regular basis, often considered essentials for daily nutrition and sustenance.

Cotton Kingdom

The term used to describe the Southern United States in the 19th century, where the economy was heavily dependent on cotton cultivation and slavery.

Slave Labor

The forced labor of individuals who are owned by others, without the freedom to refuse work and without rightful compensation.