When the Price of an Inferior Good Decreases

question 342

Multiple Choice

When the price of an inferior good decreases,

• A)both the income and substitution effects encourage the consumer to purchase more of the good.
• B)both the income and substitution effects encourage the consumer to purchase less of the good.
• C)the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good.
• D)the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.

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Definitions:

Bargaining Power

The leverage that a party has in negotiations, affecting the terms and conditions of agreements.

Socio-Cultural

Relating to the interaction of social and cultural elements in society, influencing behaviors, values, practices, and institutions.

Competitive

Relating to or characterized by competition; trying to win or be more successful than others.

Technological

Pertaining to technology, which involves the application of scientific knowledge for practical purposes, especially in industry.