Consider a Consumer Who Purchases Two Goods, X and Y

question 130

Multiple Choice

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

• A) cause the consumer to buy more of good Y and less of good X.
• B) cause the consumer to buy more of good X and less of good Y.
• C) not affect the amount of goods X and Y that the consumer buys.
• D) result in an upward-sloping demand for good Y because of the substitution effect.

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Definitions:

Discretionary Income

The portion of a person's income that remains available for spending, investment, or savings once taxes and essential personal expenses have been deducted.

Standard Of Living

refers to the level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class or geographic area.

Spendthrifts

Individuals who spend money in an extravagant and uncontrolled manner.

Tightwads

Individuals who are excessively frugal, often to the point of foregoing necessary or beneficial expenditures out of an aversion to spending money.