If the Price of a Normal Good Rises, the Income

question 162

Multiple Choice

If the price of a normal good rises, the income effect will result in households buying ________ of the good and the substitution effect will result in households buying ________ of the good.

• A) more; more
• B) more; less
• C) less; more
• D) less; less

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Definitions:

Cost-Plus Approach

A pricing strategy where a fixed percentage or fixed amount is added to the total cost of producing a product or delivering a service to determine its selling price.

Projected Selling Price

The anticipated price at which a product is expected to be sold in the future, considering factors such as cost, market demand, and competition.

Unnecessary Costs

Expenses that do not add value to the product or service and could be eliminated without affecting the quality or output.

Variable Factory Overhead

This includes costs of factory operations that vary directly with the volume of output, such as utilities and supplies used in production.