When the Price of a Good Increases, Ceteris Paribus, Consumers

question 121

Multiple Choice

When the price of a good increases, ceteris paribus, consumers perceive:

• A)an increase in wellbeing if the price increase occurs for an inferior good
• B)an increase in income if the price increase occurs for a normal good
• C)a loss in wellbeing since they can no longer purchase the same bundle that they had previously
• D)a net gain in income if they increase consumption of some goods

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Definitions:

Government Of Canada

The federal administration and institutions of Canada, responsible for national policy and governance.

Inflation Premium (IP)

The premium added to the real risk-free rate of interest to compensate for the expected loss of purchasing power. The inflation premium is the average rate of inflation expected over the life of the security.

Default Risk Premium (DRP)

The additional yield that investors demand to compensate for the risk of default by the issuer of a bond beyond the risk-free rate.

Liquidity Premium (LP)

Liquidity Premium refers to the extra return investors demand to compensate for investing in securities with low liquidity or those difficult to sell quickly at market value.