The Substitution Effect of a Price Increase

question 146

Multiple Choice

The substitution effect of a price increase:

• A) causes the consumer to purchase less of the good that is now relatively more expensive.
• B) causes the consumer to purchase more of the good whose price has risen.
• C) can cause the consumer to purchase either more or less of the good.
• D) has no effect on the amount purchased of either good.

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Definitions:

Legal Tender

Money that must be accepted if offered in payment of a debt; the legally recognized form of payment within a given jurisdiction.

Incidental Damages

Damages awarded for losses indirectly, but closely, attributed to a breach to cover any expenses paid out by an innocent party to prevent further loss.

Breach

A violation or infringement of a law, obligation, standard, or contract.

Reasonable Expenses

These are costs deemed necessary and appropriate under certain circumstances, often considered when evaluating expense claims or budgets.