Substitution and Income Effects of a Change in Price of a Good

question 56

Multiple Choice

Substitution and income effects of a change in price of a good may be used to explain the:

• A) direct relationship between price and quantity purchased.
• B) inverse relationship between price and quantity demanded.
• C) direct relationship between price and quantity supplied.
• D) direct relationship between income and demand.

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Definitions:

Photosynthesis

The process by which green plants and some other organisms use sunlight to synthesize nutrients from carbon dioxide and water.

Cohesion-tension

A hypothesis that explains the process of water movement up plants due to water molecules' cohesive and adhesive properties and the evaporation of water from the leaves.

Xylem

the vascular tissue in plants that conducts water and dissolved nutrients upward from the root and also helps to form the woody element in the stem.

Transpiration

Plant’s loss of water to the atmosphere, mainly through evaporation at leaf stomata.