When the Price of a Normal Good Decreases

question 60

Multiple Choice

When the price of a normal good decreases,

• 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:

Income Statement

A financial report detailing a company's revenue, cost of goods sold, gross profit, operating expenses, and net income over a specific period.

Managers

Individuals responsible for planning, directing, and overseeing the operations and fiscal health of a business or organization.

Cash Basis

An accounting method where revenues and expenses are recorded only when cash is received or paid out.

Accrual Basis

An accounting method where revenue and expenses are recorded when earned or incurred, regardless of when cash is exchanged.