In Examining the Data Below, the Manager Exclaimed That He

question 5

Multiple Choice

In examining the data below, the manager exclaimed that he was very happy to see no bias in the forecasts.How would you respond to the manager?

• A)You are correct.
• B)I'm sorry, but there is a slight negative bias.
• C)I'm sorry, but there appears to be slight positive bias.
• D)There is no way to estimate bias with the given information.

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Definitions:

Substitution Effect

The substitution effect occurs when consumers replace more expensive items with less costly alternatives.

Income Effect

A change in the quantity demanded of a good or service as a result of a change in real income (purchasing power).

Inferior Good

A type of good for which demand declines as the income of individuals or the economy increases, opposite to normal goods.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute a cheaper good for a more expensive one.