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

question 8

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

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Definitions:

Formal Operations

The final stage in Piaget's theory of cognitive development, starting around age 12, where individuals develop the ability to think abstractly and logically.

Procedural Knowledge

Type of knowledge that is concerned with how to perform a task or activity, often manifested as skills or know-how.

Declarative Knowledge

Knowledge that can be consciously recalled, such as facts and events.

Horace

A Roman poet known for his works in the Ars Poetica and Odes, contributing significantly to the development of Latin literature.