Consider the Income and Substitution Effects of Price Changes

question 8

Multiple Choice

Consider the income and substitution effects of price changes.For a product with an income elasticity greater than one,a price increase will cause the consumer's real income to

• A)rise and the quantity purchased to fall.
• B)fall and the quantity purchased to fall.
• C)rise and the quantity purchased to rise.
• D)fall and the quantity purchased to rise.
• E)remain constant.

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Definitions:

Internalization

The process of incorporating the beliefs, attitudes, or values of others into one's own belief system.

Moral Standards

Rules or principles governing what is considered right or wrong behavior.

Superego

In Sigmund Freud’s theory, the internalization of the moral standards of society inculcated by the child’s parents.

Reality Principles

The ability of the mind to assess the external world and act upon it rather than based on internal desires.