If the Price of a Good Increases, All Else Equal

question 441

Multiple Choice

If the price of a good increases, all else equal, consumers perceive

• A)an increase in purchasing power if the good is an inferior good.
• B)an increase in income if the price increase occurs for a normal good.
• C)a decrease in purchasing power.
• D)a net gain in purchasing power if they decrease consumption of some goods.

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Definitions:

Market Price

The present cost at which a service or asset is available for purchase or sale in the marketplace.

Pairs of Earrings

Not an economic key term, but could be referenced in examples relating to consumer goods or inventory.

AVC

Average Variable Cost, the cost per unit of varying the level of output, exclusive of fixed costs.

TVC

Total Variable Costs, which refers to all variable expenses associated with the production of goods or services.