When Moving Along a Compensated Demand Curve, the Income Effect

question 22

Multiple Choice

When moving along a compensated demand curve, the income effect is

• A)positive for an inferior good
• B)positive for a normal good
• C)negative for a normal good
• D)zero for both normal and inferior goods

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Definitions:

Economies of Scale

The cost advantage that arises with increased output of a product, as fixed costs are spread over more units of production.

Price Competition

A market situation where sellers compete primarily on the price of their goods or services, often leading to lower prices for consumers.

Oligopolistic Industries

Markets or industries dominated by a few large firms, where each firm has some market power and their decisions affect each other.

Celler-Kefauver Act

A United States antitrust law passed in 1950 aimed at preventing anticompetitive mergers and acquisitions that might reduce competition.