If the Price of a Good Falls and the Consumer

question 78

Multiple Choice

If the price of a good falls and the consumer decides to buy more of the good solely because it is relatively less expensive, this describes the:

• A) income effect.
• B) substitution effect.
• C) consumer surplus effect.
• D) marginal maximizing rule.

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Definitions:

Net Income

The total earnings or profit of a company after subtracting all expenses, including taxes, interest, and operating expenses, from total revenue.

Merchandise Purchases Budget

A financial plan that estimates the cost of goods a business needs to purchase to meet its sales goals and maintain inventory levels.

Expected Cash Collections

The projected amount of cash a company anticipates to receive from customers over a specific period.

Accounts Receivable

Funds due to a company from its clients for products or services rendered but still unpaid.