The Price of Cereal Rises

question 64

Multiple Choice

The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behaviour is an example of

• A)an increase in the quantity supplied of eggs because of the income effect.
• B)an increase in the quantity demanded of eggs because of the income effect.
• C)a decrease in the quantity demanded of cereal because of the substitution effect.
• D)a decrease in the quantity supplied of cereal because of the substitution effect.

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Definitions:

Cash Receipts

The collection of money, including currency, checks, and electronic transfers, by a business.

Sales Budget

An estimate of future sales, often detailed in terms of volume and revenue, used for planning and controlling a business's operations.

Cash Collections

The process of gathering all cash received from sales, receivables, and other sources during a given period.

Direct Materials

Basic substances used explicitly in the manufacturing of certain products or services.