When the Price of a Good Falls, the Income Effect

question 264

Multiple Choice

When the price of a good falls, the income effect for a normal good implies that people buy

• A) less of that good because they cannot afford to buy all the things they previously bought.
• B) more of that good because the relative price of the good has risen.
• C) more of that good because they can afford to buy more of all the things they previously bought.
• D) less of that good because the relative price of the good has fallen.

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Definitions:

Globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale.

Competitive Advantage

The attributes or conditions that allow a company to produce goods or services better or more cheaply than its competitors, leading to a favorable position in the market.

Adaptive

Characterized by or denoting the capacity to adjust to new conditions or environments for better survival or functionality.

Flexible Organizations

Organizations that are able to adapt quickly to changes in the market or environment, often through the utilization of adaptable strategies, structures, and work processes.