If the Price of a Good Increases, All Else Equal

question 441

Multiple Choice

If the price of a good increases, all else equal, consumers perceive

• A)an increase in purchasing power if the good is an inferior good.
• B)an increase in income if the price increase occurs for a normal good.
• C)a decrease in purchasing power.
• D)a net gain in purchasing power if they decrease consumption of some goods.

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Definitions:

Monopolistic Competition

A market structure where many firms sell products that are similar but not identical, allowing for product differentiation.

Product Differentiation

The practice of setting a product or service apart from those in the marketplace to increase its attractiveness to a designated target market.

Market Price

The going rate for purchasing or selling a good or service in a specified market at this time.

Output Price

Refers to the price at which goods or services are sold in the market, affecting producers' revenue.