Suppose a Consumer Can Purchase Only Two Goods,soap and Apples

question 44

Multiple Choice

Suppose a consumer can purchase only two goods,soap and apples.If the price of soap falls and the consumption of apples increases,we can conclude that the increased consumption of apples is due to

• A)the income effect only.
• B)the substitution effect only.
• C)the deflation effect.
• D)both the income effect and the substitution effect.
• E)neither the income effect nor the substitution effect.

---

Definitions:

Net Income

The profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Total Contribution Margin

The difference between total sales revenue and total variable costs, representing the amount available to cover fixed expenses and generate profit.

Variable Cost

Costs that fluctuate with the level of production or sales, such as raw materials or commission fees.

Fixed Costs

Fixed costs are expenses that do not change with the level of production or sales activities within a certain range or period.