Which of the Following Is a Reason for a Decrease

question 119

Multiple Choice

Which of the following is a reason for a decrease in the average propensity to consume with an increase in income?

• A) The amount of savings decreases, and the consumption of necessities increases.
• B) The expenditure on luxury goods increases, and the amount of savings decreases.
• C) The expenditure on luxury goods represents only a small portion of income.
• D) The amount of savings represents only a small portion of income.
• E) The cost of necessities represents only a small portion of income.

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Definitions:

Below-Market Pricing

A pricing strategy where goods or services are offered at prices lower than the typical market value.

Loss-Leader Pricing

A pricing strategy where a product is sold at a price below its market cost to stimulate other profitable sales.

Yield Management Pricing

A pricing strategy that involves adjusting prices based on expected demand levels, commonly used in the airline and hotel industries.

Skimming Pricing

A pricing strategy where a firm charges the highest initial price that customers will pay and lowers it over time as the demand at the higher price decreases.