If the Price of Lattes, a Normal Good You Enjoy

question 114

Multiple Choice

If the price of lattes, a normal good you enjoy, falls, then

• A)the income and substitution effects offset each other but the price effect leads you to buy more lattes.
• B)both the income and substitution effects lead you to buy more lattes.
• C)the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more lattes purchased.
• D)the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more lattes purchased.

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Definitions:

Insulin

A biochemical produced in the pancreas that helps regulate the amount of sugar in the blood by enabling tissues to absorb glucose.

ADH

Anti-Diuretic Hormone, a peptide hormone that regulates the body's retention of water by increasing water reabsorption in the kidneys.

Thyroid Hormone

A hormone produced by the thyroid gland, critical to the regulation of metabolism and energy.

TSH

Thyroid-Stimulating Hormone; a hormone produced by the pituitary gland that regulates the production of thyroid hormones and thus controls metabolism.