Ray's Company Just Announced Everyone Will Be Getting Their Pay

question 76

Multiple Choice

Ray's company just announced everyone will be getting their pay cut by 5% in order to avoid having to close down.Ray's demand for coffee,a normal good,will likely:

• A)decrease,and his demand curve will shift to the right.
• B)decrease,and his demand curve will shift to the left.
• C)increase,and his demand curve will shift to the right.
• D)increase,and his demand curve will shift to the left.

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Definitions:

Economic Good

A product or service that has value and can be sold in a market because it is scarce in relation to demand.

Substitution Effect

That part of an increase (decrease) in amount consumed that is the result of a good being cheaper (more expensive) in relation to other goods because of a reduction (increase) in price.

Income Effect

The change in consumption resulting from a change in real income, typically due to a price change of goods or services.

Marginal Satisfaction

The change in satisfaction or utility that a consumer experiences from consuming an additional unit of a good or service.