When a Consumer Experiences a Price Decrease for an Inferior

question 19

Multiple Choice

When a consumer experiences a price decrease for an inferior good,it is possible that the income effect is

• A) less than the substitution effect,and the demand curve will be downward sloping.
• B) greater than the substitution effect,and the demand curve will be upward sloping.
• C) less than the substitution effect,and the demand curve will be upward sloping.
• D) both a and b are correct.

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Definitions:

Par Common Stock

The face value of a share of common stock as specified in the corporate charter.

Purchase Price

The total cost incurred to acquire an asset, including the price of the asset itself along with any additional costs necessary to bring the asset to a usable state.

Treasury Stock

Stock that has been bought back by the issuing company, reducing the amount of outstanding stock on the open market.

Sold for Less

A situation where the selling price of goods or services is less than their cost or original value.