Anthony Has Set Aside $120 Each Month for His Favorite

question 97

Multiple Choice

Anthony has set aside $120 each month for his favorite activities-buying records and going to concerts. The price of a record is $10, and the price of a concert ticket is $30. He currently consumes three records and three concerts each month. If the price of a concert increases to $40, the substitution effect predicts that Anthony will consume:

• A)more records and concerts.
• B)fewer records and concerts.
• C)more records and fewer concerts.
• D)fewer records and more concerts.

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Definitions:

Expenditure Item

A specific category of spending, often detailed in budgets or financial reports, representing the purchase of goods or services.

Marginal Tax Rate

The rate of tax applied to the next dollar of income, indicating how much tax an individual will pay on an additional dollar of earnings.

Income Tax Schedule

A set of brackets that determine the tax rate applied to an individual's or corporation's income.

Average Tax Rate

The percentage of total income that is paid in taxes, calculated by dividing the total amount of taxes paid by the total income.