You Can Spend $10 for Lunch and You Would Like

question 145

Multiple Choice

You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger. This is best described as:

• A)the substitution effect of a price change.
• B)the income effect of a price change.
• C)a decrease in the buyer's reservation price.
• D)an increase in the buyer's reservation price.

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Definitions:

Transaction

An agreement or exchange between two parties that involves the selling, buying, or trading of goods, services, or information.

Holiday Turkeys

Generally refers to the practice of giving turkeys to employees during the holiday season, which may have tax implications depending on the value and method of distribution.

Employees' Income

The compensation received by individuals for their services performed for employers, including wages, salaries, bonuses, and commissions.

Original Issue Discount

The difference between the face value and the actual issue price of a bond, representing additional interest income over the bond's life.