Consider the Indifference Curve Map and Budget Constraint for Two

question 284

Multiple Choice

Consider the indifference curve map and budget constraint for two goods,X and Y.Suppose the good on the horizontal axis,X,is normal.When the price of X increases

• A) the substitution effect and income effect both cause an increase in the consumption of X.
• B) the substitution effect causes a decrease in the consumption of X,and the income effect causes an increase in the consumption of X.However,the substitution effect is greater than the income effect.
• C) the substitution effect causes an increase in the consumption of X,and the income effect causes a decrease in the consumption of X.However,the substitution effect is greater than the income effect.
• D) the substitution effect and income effect both cause a decrease in the consumption of X.

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Definitions:

Corporate Tax Rate

The percentage of a corporation's profits that is handed over to the government as tax.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life.

Bankruptcy

A legal process for individuals or businesses unable to meet their outstanding debts, allowing them to negotiate for partial or complete relief.