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:

Minimum Wage

The lowest hourly, daily, or monthly remuneration that employers may legally pay to workers, aimed at protecting the earning ability of workers.

Medallions

A type of license or permit, often required for operating taxicabs and other regulated services in certain cities.

Taxicabs

Licensed vehicles for hire with drivers, offering rides from one location to another, often found in urban areas.

New York City

A major metropolitan area in the United States, known for its significant impact on global finance, culture, media, and fashion.