Assume That a College Student Purchases Only Ramen Noodles and Textbooks

question 327

Multiple Choice

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the substitution effect associated with a decrease in the price of a textbook, by itself, will result in

• A)a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
• B)a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles.
• C)an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles.
• D)an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.

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Definitions:

Wheat Yields

The quantity of wheat produced per unit of land area.

Total Revenues

The total amount of money generated by a firm from its sales activities before any costs or expenses are subtracted.

Price Elasticity

A measure of how the quantity demanded or supplied of a good changes in response to a change in its price, indicating the sensitivity of consumers or producers to price changes.

Elastic

Describing a situation where the demand or supply for a product responds significantly to changes in price.