Suppose That Consumers' Preferences Are Well Behaved in That Properties

question 167

Multiple Choice

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that both X and Y are normal goods and that the price of good Y decreases.Then, which of the following effect is known with certainty.

• A)the income and substitution effect reinforce one another leading to an overall increase in the consumption of good X.
• B)the income and substitution effect reinforce one another leading to an overall decrease in the consumption of good X.
• C)the income and substitution effect will have competing effects leading to an indeterminate impact on the consumption of good X.
• D)the income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y.

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Definitions:

Superior Claim

A legal assertion that some interests or rights (such as those in property) are ranked higher than others, giving them priority in being honored or executed.

Harvester

An individual or machine that gathers crops or other natural resources from fields or natural habitats.

Storage Yard

A designated outdoor area used for the keeping of goods, materials, vehicles, or equipment.

Common Carriers

Businesses that provide transportation services to the public under the regulation of government agencies, typically involving the conveyance of goods or people.