When the Price of a Normal Good Falls, the Substitution

question 26

Multiple Choice

When the price of a normal good falls, the substitution effect contributes to a(n) _______ in the quantity demanded and the income effect _______ the substitution effect.

• A) decrease; reinforces
• B) increase; reinforces
• C) increase; opposes
• D) decrease; opposes

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Definitions:

Date of Declaration

The specific date on which a company's board of directors announces its intention to pay a dividend to shareholders.

Cumulative Preferred Stock

A type of preferred stock where dividends accumulate if not paid in a given year, and must be paid out before common stock dividends.

Par Common Stock

The nominal or face value assigned to common stock by the issuing company.

Cumulative Preferred Stock

A type of preferred stock where dividends accumulate if not paid in a given period and must be paid out before common dividends can be distributed.