If Is an Inferior Good and the Price of

question 36

Multiple Choice

If is an inferior good and the price of falls

• A) the substitution effect will induce the consumer to purchase more and the income effect will induce the consumer to purchase more .
• B) the substitution effect will induce the consumer to purchase more and the income effect will induce the consumer to purchase less .
• C) the substitution effect will induce the consumer to purchase less and the income effect will induce the consumer to purchase more .
• D) the substitution effect will induce the consumer to purchase less and the income effect will induce the consumer to purchase less .

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Definitions:

Average Fixed Cost

is calculated by dividing the total fixed costs of production by the quantity of output produced, showing the cost per unit of output.

Total Variable Cost

The sum of all variable expenses related to the production of goods or services, which vary with the level of output.

Total Cost

The sum of all costs incurred by a business in producing a certain quantity of a good or service.

Marginal Cost

The cost change associated with making an additional unit of a product, emphasizing the incremental expense in production activities.