If the Price of an Inferior Good Rises, the Income

question 157

Multiple Choice

If the price of an inferior good rises, the income effect will result in households buying ________ of the good and the substitution effect will result in households buying ________ of the good.

• A) more; more
• B) more; less
• C) less; more
• D) less; less

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Definitions:

Incidence

The measurement or frequency of occurrence, often used in the context of the distribution of a tax burden.

Federal Tax System

The mechanism by which the United States government collects taxes from individuals and businesses to fund public services and infrastructure.

Progressive

In economics, refers to taxation or policies that proportionally take more from those who have more income or wealth.

Perfectly Elastic

Describes a situation in which the quantity demanded or supplied of a good responds infinitely or extremely to changes in its price.