When the Price of a Good Changes, the Income Effect

question 90

Multiple Choice

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

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

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Definitions:

Semantic Memory

A type of long-term memory that involves the storage of general knowledge and facts about the world.

Contestant

An individual who takes part in a competition, aiming to win or achieve a high ranking.

Reliant

Depending on someone or something for support, assistance, or supply.

Declarative Memory

The aspect of human memory that stores facts and events, making it possible for individuals to consciously recall and articulate their knowledge.