When the Price of a Good Changes, the Substitution Effect

question 16

Multiple Choice

When the price of a good changes, the substitution effect can found by comparing the equilibrium quantities purchased:

• A)on the new budget line and a line parallel to the old budget line tangent to the new indifference curve.
• B)on the old budget line and on the new budget line.
• C)the new budget line and a line parallel to the new budget line tangent to the old indifference curve.
• D)on the old budget line and a line parallel to the new budget line tangent to the old indifference curve.

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Definitions:

Organizing

The act of arranging and coordinating activities and responsibilities in an efficient and orderly structure within an organization or for any project.