Suppose Your Income Doubled And, at the Same Time, the Prices

question 22

Multiple Choice

Suppose your income doubled and, at the same time, the prices of all goods doubled. Suppose you continue to purchase exactly the same bundle as before. What would the law of demand suggest about this behaviour?

• A)Reasonable, because the relative price did not change.
• B)Uncertain, because we don't know if the goods you purchase are normal or not.
• C)Once you have a chance to adjust, you will purchase the low cost goods.
• D)Not possible, because when the price goes up the quantity demanded always falls.

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Definitions:

Canadian Dollars

The Canadian dollar is the currency of Canada, often represented by the symbol C$ or CAD, and it is used throughout the country for financial transactions.

Callable

A term describing a financial security (e.g., a bond) that can be redeemed by the issuer before its maturity date at a predetermined price.

Call Premium

The extra amount that must be paid by the issuer to call a bond before its maturity date, above its par value.

Required Rate

The minimum rate of return on an investment that is necessary for it to be considered a viable option by investors or managers.