Good X Is an Inferior Good but Not a Giffen

question 533

Multiple Choice

Good X is an inferior good but not a Giffen good. When the price of X increases, the consumer will consume

• A)more X.
• B)the same amount of X.
• C)less X.
• D)more or less X depending on the size of the income effect relative to the size of the substitution effect.

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Definitions:

Trough

The transition point between recession and recovery.

Business Cycle

The economic cycle that involves periods of economic expansion, peak, contraction, and trough.

Contraction

A period of economic decline marked by falling GDP, reduced consumer spending, and increased unemployment.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the degree to which a company can increase its profits by increasing sales.