When the Price of a Good Decreases, Ceteris Paribus, the Lower

question 89

Multiple Choice

When the price of a good decreases, ceteris paribus, the lower price:

• A)generally encourages the consumption of inferior goods
• B)leads to a parallel shift of the linear budget constraint
• C)will necessarily lead to a decrease in the consumption of goods whose price did not change
• D)expands the consumer's set of buying opportunities

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Definitions:

Market Equilibrium

A situation where, at the current price, the quantity of goods supplied equals the quantity of goods demanded, leading to a stable market condition.

Optimal Allocation

The most efficient distribution of resources and services, maximizing the benefit from their use.

External Costs

Costs not reflected in the market price of goods or services, borne by a third party or society at large.

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single entity can significantly influence prices or market conditions.