If the Price of a Good Changes So That the Income

question 113

Multiple Choice

If the price of a good changes so that the income effect and the substitution effect reinforce one another,this means the good is:

• A)inferior.
• B)always on the budget line.
• C)normal.
• D)not likely to be bought.

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Definitions:

CPI

Tracking the average evolution in pricing for a collection of goods and services purchased by people in urban areas, the Consumer Price Index serves as an indicator of these changes over time.

Consumer Price Index

The Consumer Price Index measures the average change over time in the prices paid by consumers for a basket of goods and services.

Base Year

Base year is a specific year against which economic growth or other market indices are measured, serving as a standard or reference point for economic analysis.

CPI

The Consumer Price Index reflects the weighted average price changes in a variety of consumer goods and services, such as medical services, food, and transportation.