Suppose Peanut Butter Is an Inferior Good for Ilia and the Price

question 445

Multiple Choice

Suppose peanut butter is an inferior good for Ilia and the price of peanut butter rises.What will happen to Ilia's consumption of peanut butter?

• A)The substitution effect will cause an increase in the consumption of peanut butter.
• B)The substitution effect will cause a decrease in the consumption of peanut butter and the income effect will cause an increase in the consumption of peanut butter.
• C)The substitution effect will cause a decrease in the consumption of peanut butter.
• D)The income effect will cause an increase in the consumption of peanut butter.

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Definitions:

Elastic

The ability of an object or material to resume its normal shape after being stretched or compressed, a characteristic of materials like rubber.

Oxytocin

Hormone, released by the posterior pituitary, that causes contraction of the uterus and milk letdown.

Uterus

In mammals, expanded portion of the female reproductive tract through which eggs pass to the environment or in which an embryo develops and is nourished before birth.

Hormones

Chemical substances produced in the body that regulate the activity of cells or organs, essential for every activity of life, including the processes of digestion, metabolism, growth, reproduction, and mood control.