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:

Macroeconomics

The study of the economic behavior of entire economies, as measured, for example, by total production and employment.

Chinese Economy

The economy of China, characterized by its large size, rapid growth, and transition from a centrally planned economy to a more market-oriented system.

Rational Choice

Rational choice is a theory in economics that assumes individuals make decisions that provide them with the greatest benefit or satisfaction given the choices available.

Predetermined Goal

A specific objective or target set in advance that guides decision-making and strategy formulation.