When the Price of a Normal Good Increases

question 93

Multiple Choice

When the price of a normal good increases,

• A)both the income and substitution effects encourage the consumer to purchase more of the good.
• B)both the income and substitution effects encourage the consumer to purchase less of the good.
• C)the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good.
• D)the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.

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Definitions:

Copayments

Fixed amounts paid by a consumer for healthcare services at the time of service, with the remainder covered by insurance.

Health Care Costs

The expenses associated with medical and health services, including treatment, medication, and hospitalization.

Preferred Provider Organizations

Health care organizations that offer members discounted rates for medical care from a network of preferred providers, while still covering some costs for care outside the network.

Discounted Prices

Prices reduced from the original or list price, often to encourage prompt payment or bulk purchasing.