Data on the Amount of Money Made in a Year

question 4

Multiple Choice

Data on the amount of money made in a year by 1,000 families in a small town were collected. You want to know how much each family will get if the money made by all the 1,000 families is pooled together and then evenly redistributed back to them. Which of the following would you compute?

• A) Arithmetic mean
• B) Median
• C) Interquartile range
• D) Coefficient of correlation

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Definitions:

Income Effect

The impact of income changes on the demand for goods or services by an individual or within the economy.

Substitution Effect

Describes how consumers react to a change in the price of a good by substituting it with another good that is relatively cheaper.

Income Effect

The income effect refers to the change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute one good for another more or less expensive.