If Two Goods Are Substitute Goods

question 133

Multiple Choice

If two goods are substitute goods,

• A)an increase in the price of one will cause a decrease in the demand for the other.
• B)an increase in the price of one will cause an increase in the demand for the other.
• C)the price elasticity of demand for both goods will be greater than 1.
• D)the price elasticity of demand for both goods will be less than 1.

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Definitions:

Base Rate Fallacy

A cognitive error where people wrongly judge the likelihood of a situation by ignoring general statistical information and focusing on specific information.

Gambler's Fallacy

The erroneous belief that if something happens more frequently than normal during a given period, it will happen less frequently in the future, or vice versa.

Overestimation Fallacy

The cognitive bias of overestimating one's own abilities, performance, level of control, or chances of success.

Manual Babbling

Early non-verbal gestures or movements made by infants that precede the development of spoken language.