When the Price of a Pizza Decreases from $12 to $10

question 164

Multiple Choice

When the price of a pizza decreases from $12 to $10, it is definitely the case that the

• A) substitution effect means people buy more pizza.
• B) quantity demanded of pizza will not change.
• C) income effect means people buy less pizza.
• D) None of the above answers is correct.

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Definitions:

Optimal Lot Size

The most economically advantageous quantity of a product to order or produce, balancing between ordering costs and holding costs.

Economic Order Quantity

A formula used to determine the most cost-effective quantity of inventory to order, balancing the costs of ordering and holding stock.

Optimal Order Quantity

The most efficient amount of stock to order that minimizes total inventory costs, including ordering and holding costs.

Ordering Costs

Expenses associated with making an order for goods, including costs for processing, shipping, and receiving materials.