Given a Downward Sloping Demand Curve and an Upward Sloping

question 190

Multiple Choice

Given a downward sloping demand curve and an upward sloping supply curve for product X, an increase in the price of a substitute good (in consumption) will:

• A)increase equilibrium price and quantity of X.
• B)decrease equilibrium price and quantity of X.
• C)increase equilibrium price and decrease equilibrium quantity of X.
• D)decrease equilibrium price and increase equilibrium quantity of X.

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Definitions:

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The study of what drives individuals to initiate, direct, and sustain behaviors to satisfy their needs and achieve goals.

Validity Effect

The tendency of people to believe that a statement is true or valid simply because it has been repeated many times.

Familiarity Effect

A psychological phenomenon whereby people tend to develop a preference for things merely because they are familiar with them.