A Substitution Effect

question 7

Multiple Choice

A substitution effect

• A)is due to the change in relative prices.
• B)is known as the uncompensated response.
• C)is known as excess burden.
• D)is due to the loss of income because relative prices are unaffected.

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Definitions:

Carrying Cost

The total costs associated with holding inventory or assets, including storage, insurance, and taxes.

Administrative Costs

Expenses related to the general operation of a business, including salaries of executive officers, legal and clerical salaries, and other general expenses.

Sales Taxes

Taxes imposed by governments on sales of goods and services, typically calculated as a percentage of the retail price paid by the consumer.

Perpetual Systems

Inventory management systems that continuously update the quantity and value of inventory stock, allowing for real-time tracking.