As a Result of a Decrease in the Price of a Substitute

question 190

Multiple Choice

As a result of a decrease in the price of a substitute for your firm's product, you should anticipate a ________price for your product than the current equilibrium price and a________ equilibrium quantity than the current equilibrium quantity.

• A)higher; higher
• B)higher; lower
• C)lower; higher
• D)lower; lower

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Definitions:

Classical Assumption

In economics, refers to the traditional ideas that free markets function under equilibrium with full employment and price flexibility.

Money Balances

The total amount of money held by an individual or entity at any given time.

Discretionary Monetary Policy

Monetary policy actions that are based on the judgment of policymakers rather than set by predetermined rules, allowing flexibility in response to economic conditions.

Capitalistic Economy

An economic system where trade, industry, and the means of production are largely or entirely privately owned and operated for profit.