Dave Consumes Two Normal Goods, X and Y, and Is

question 505

Multiple Choice

Dave consumes two normal goods, X and Y, and is currently at an optimum. If the price of good X falls, we can predict with certainty that

• A)Dave will consume more of both goods because his real income has risen.
• B)the substitution effect will be positive for good X and negative for good Y.
• C)Dave may consume more or less of good X, but he will consume less of good Y.
• D)the substitution effect will offset the income effect for good X.

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Definitions:

Premium on Bonds Payable

The amount by which a bond's selling price exceeds its face value, reflecting higher interest earnings for the investor than the market rate.

Conversion

The process of changing assets from one form to another, such as the conversion of raw materials into finished goods.

Mortgage Note Payable

A long-term liability listed on a company's balance sheet representing the borrower's obligation to repay a secured loan, typically used for real estate purchases.

Construction

The process of building, assembling, or forming infrastructure, buildings, or other constructed assets.