When the Price of a Normal Good Falls, Then

question 217

Multiple Choice

When the price of a normal good falls, then:

• A) both the income and substitution effects combine to cause the quantity demanded to increase.
• B) the substitution effect will cause people to buy more because the good is relatively less expensive.
• C) the income effect will cause people to buy more because of the increased purchasing power associated with the lower price.
• D) all of these.

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Definitions:

Personal Debt

The total amount of money an individual owes to lenders, including loans, credit card debt, and mortgages.

Cash Distribution

The payment of earnings, or other financial assets, to shareholders or partners in a company or fund.

Income-Sharing Ratio

The predetermined agreement on how profits or losses will be distributed among partners or stakeholders in a business arrangement.

Capital Deficiency

A financial state where a company's liabilities exceed its assets, indicating financial distress.