The Substitution Effect of an Increase in the Price of Peaches

question 287

Multiple Choice

The substitution effect of an increase in the price of peaches is

• A)the change in the quantity demanded that results from a change in the price of peaches, making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
• B)the change in the demand for nectarines (a substitute good)that results when peaches become more expensive relative to nectarines, holding constant the effect of the price change on consumer purchasing power.
• C)the change in the quantity of peaches demanded that results from the effect of the change in the price of peaches on the consumer's purchasing power.
• D)the change in the demand for peaches that results when the price of peaches increases.

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Definitions:

Monetary Policy

The process by which a central bank, like the Federal Reserve, controls the supply of money, often targeting an inflation rate or interest rate to ensure economic stability and growth.

Primary Growth

The initial stage of growth or expansion in an organism, market, or economic indicator, often characterized by rapid increases or significant changes.

Economy

The system of production, distribution, and consumption of goods and services within a particular society or geographical area.

Money

A medium of exchange that facilitates the trade of goods and services and serves as a measure of value and a store of wealth.