When the Price of a Good Falls, Consumers Buy a Larger

question 155

Multiple Choice

When the price of a good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.

• A)substitution; income
• B)normal; inferior
• C)substitute; complement;
• D)supply; demand

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Definitions:

Marginal Cost

The increment in overall expenditure that comes from the production of an extra unit of a product or service.

Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and products that are similar enough to be considered substitutes.

Legislation Limits

Restrictions or caps established by laws or regulatory bodies that aim to control or regulate certain activities or behaviors.

Cost Function

A mathematical formula that describes the total cost of production as a function of the quantity of output produced.