If a Good Is Inferior and Its Price Increases

question 18

Multiple Choice

If a good is inferior and its price increases,

• A)the income effect will be positive and the substitution effect will be positive.
• B)the income effect will be negative and the substitution effect will be negative.
• C)the income effect will be positive and the substitution effect will be negative.
• D)the income effect will be negative and the substitution effect will be positive.

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Definitions:

Fixed Interval Schedule

A type of conditioning schedule where rewards (reinforcements) are provided at fixed time intervals, regardless of the behavior's occurrence.

Reinforcement Theory

A psychological perspective emphasizing that behavior can be shaped by controlling the outcomes and consequences of that behavior.

Behavior

Actions, reactions, or conduct of individuals, often studied in psychology and behavioral sciences.

Agency Theory

A principle that describes the relationship between principals (such as shareholders) and agents (such as company executives), focusing on the contracts and costs involved in resolving conflicts of interest.