If a Decrease in the Price of Good Y Causes

question 35

Multiple Choice

If a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that:

• A) Y and Z are complements.
• B) Y and Z are substitutes.
• C) Y and Z are unrelated.
• D) Y is a normal good and Z is an inferior good.

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Definitions:

Deadweight Losses

Economic inefficiencies that occur when equilibrium in a market is not achieved or when market allocation of resources is not optimal, often due to externalities or government intervention.

Consumer Surplus

A rephrased definition: The economic benefit that consumers receive when they can purchase a product for less than the maximum price they are willing to pay.

Consumer Surplus

The gap between the overall sum consumers are ready and able to spend on a product or service and what they really spend.

Cognitive Dissonance

A psychological discomfort experienced when simultaneously holding two or more conflicting beliefs, ideas, or values.