The Income Effect of a Price Change Is Described by Which

question 86

Multiple Choice

The income effect of a price change is described by which of the following statements?

• A) When the price of a good falls, consumers have an implicit increase in income and can now buy more of the good.
• B) When the price of a good falls, consumers will now substitute this lower priced good for more higher priced goods.
• C) The income effect is the relative change in the amount of a good consumed when the price of another good changes.
• D) The income effect shows how a change in income at a given price will affect the quantity of a good purchased.

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Definitions:

Particles

Small localized objects to which can be ascribed several physical or chemical properties such as volume or mass.

Osmoregulation

The process by which living organisms control the concentration of water and electrolytes in their bodies to maintain homeostasis.

Concentration

The amount of a substance in a specific volume of solution, often measured in moles per liter.

Water

A ubiquitous chemical substance composed of hydrogen and oxygen, essential for all known forms of life and used in a wide range of industrial processes.