The Income Effect Refers to the Impact of a Change

question 27

Multiple Choice

The income effect refers to the impact of a change in

• A)income on the price of a good
• B)the general price level caused by a change in the price of another good
• C)the price of a good on real income
• D)the price of a substitute for the good under consideration
• E)demand when income changes

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Definitions:

Monopolistically Competitive Firms

Companies in a market structure where many firms sell products that are similar but not identical, competing on factors besides price.

Economic Profits

The financial gain exceeding the total costs, including both the explicit and implicit costs, of a business operation.

Long Run

A period in economics sufficient for all markets to adjust to equilibrium, including the production and entry and exit of firms.

Economic Profit

The financial margin that results from subtracting a business's complete costs, covering both explicit and implied ones, from its total income.