When the Price of a Good Falls, the Income Effect

question 458

Multiple Choice

When the price of a good falls, the income effect for a normal good implies that people buy

• A) less of that good because the relative price of the good has fallen.
• B) more of that good because the relative price of the good has risen.
• C) less of that good because they cannot afford to buy all the things they previously bought.
• D) more of that good because they can afford to buy more of all the things they previously bought.

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Definitions:

Biofeedback

A technique that teaches individuals to control bodily processes that are typically involuntary, through monitoring and feedback from electrodes.

Operant Conditioning

A method of learning that employs rewards and punishments for behavior, which was developed by B.F. Skinner to study behavior modification.

Biological Response

A physiological or biochemical reaction of an organism to a specific stimulus, including responses to environmental changes, stress, and diseases.

Functional Magnetic Resonance Imaging

A neuroimaging procedure that measures brain activity by detecting changes associated with blood flow.