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:

Semantic Slanting

Semantic slanting involves deliberately choosing words to make a subject appear more positive or negative, influencing perception and attitudes.

Emotional Responses

The experiential, physiological, and behavioral reactions that occur in response to stimuli perceived as emotionally significant.

Deliberate Choice

The act of making a decision consciously and intentionally.

Availability Heuristic

A psychological shortcut that leverages the readily available examples in someone's consciousness when deliberating on a particular matter, concept, methodology, or decision.