According to the Substitution Effect, If the Price of a Product

question 42

Multiple Choice

According to the substitution effect, if the price of a product goes down

• A) the consumer will buy more of the good at the lower price than at a higher price, creating a downward sloping demand curve.
• B) the consumer will buy more of the good at a lower price than at a higher price, creating a horizontal demand curve.
• C) the consumer will not change the level of purchases of the good when the price changes, making the demand curve a vertical line.
• D) the real income of the consumer will increase, causing the consumer to want to buy more of the good, creating a downward sloping demand curve.

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Definitions:

Market Demand

The total demand for a product or service in a market, aggregating all individual demands at various prices.

Long Run

A period of time in which all factors of production and costs are variable, allowing companies to adjust to market changes.

Monopolistically Competitive

Refers to a market structure where many firms sell products that are similar but not identical, allowing for some degree of market power.

Optimal Level

The optimal level signifies the most efficient, effective, or favorable point or degree for a specific goal or condition.