Consider the Indifference Curve Map and Budget Constraint for Two

question 10

Multiple Choice

Consider the indifference curve map and budget constraint for two goods, beef and potatoes. Suppose the good measured on the horizontal axis, potatoes, is a Giffen good. Beef is measured on the vertical axis and is a normal good. When the price of potatoes increases, the substitution effect causes

• A)an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes.The substitution effect is less than the income effect.
• B)a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes.The substitution effect is greater than the income effect.
• C)an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes.The substitution effect is greater than the income effect.
• D)a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes.The substitution effect is less than the income effect.

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Definitions:

Motion Pictures

A series of still images that, when shown on a screen, create the illusion of moving images due to the phi phenomenon.

Stroboscopic Movement

The optical illusion of perceived motion created when a series of static images are shown in rapid sequence.

Still Photos

Photographs that capture a single moment in time, particularly in contrast to moving images.

Size Constancy

A perceptual process allowing a person to perceive an object as the same size regardless of its distance from the observer.