The Substitution Effect

question 33

Multiple Choice

The substitution effect:

• A) Predicts that taxpayers will work harder to pay for consumer products when tax rates increase.
• B) Is one of the effects considered in static forecasting.
• C) Results in the government collecting more aggregate tax revenue than under the income effect.
• D) Is typically more descriptive for taxpayers with lower disposable income.
• E) None of the choices are correct.

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Definitions:

Television Commercial

A form of advertising broadcast on television, designed to promote a product, service, or message to a wide audience.

AIDA Model

A common model of the series of mental stages through which consumers move as a result of marketing communications.

Intention, Action, Interest

This phrase describes the progression from having a motivating desire (intention), to undertaking a specific behavior (action), to maintaining focus on an activity or subject (interest).

Think, Feel, Do

A model describing the cognitive, emotional, and behavioral responses that marketing or any stimulus can evoke in individuals.