If a Consumer Is Buying Two Goods and a Decrease

question 66

Multiple Choice

If a consumer is buying two goods and a decrease in the price of one good results in the consumer buying more of both goods:

• A) the income effect resulted in increasing the amounts of both goods purchased.
• B) the demand curves for the two goods shifted to the right.
• C) the substitution effect was extremely strong, but the income effect was zero.
• D) none of the above statements are true.

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where market supply equals market demand.

Agricultural Price Floors

Government-imposed limits on how low prices can fall for agricultural products, aimed at stabilizing farmers' incomes.

Surplus

The situation in which the quantity of a good supplied exceeds the quantity demanded at a specific price.

European Union

A political and economic union of 27 European countries that participate in a single market allowing free movement of goods, services, capital, and people.