When We Derive the Demand Curve for a Good, We

question 188

Multiple Choice

When we derive the demand curve for a good, we should remember that the

• A)income effect must be greater than the substitution effect.
• B)substitution effect must be greater than the income effect.
• C)substitution effect must be in the same direction as the income effect.
• D)income effect and the substitution effect may work in the same or in opposite directions.

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Definitions:

Pure Command Economy

An economic system where all production, investment, prices, and incomes are controlled by the government.

Privately Owned

Refers to properties, businesses, or assets that are owned by individuals or private companies and not by the state or public entities.

Price System

A mechanism through which prices adjust to balance supply and demand for goods and services in an economy.

Centralized Planning

A system of economy where all choices related to the creation and allocation of goods and services are made by a central governmental body.