The Difference Between a Price Increase and a Decrease in Income

question 131

Multiple Choice

The difference between a price increase and a decrease in income is that:

• A) a decrease in income does not affect the slope of the budget line, while an increase in price does change the slope.
• B) a price increase does not affect the consumption of other goods, while a decrease in income does.
• C) a price increase will increase real income, while a decrease in income will increase real income.
• D) None of the preceding statements is correct.

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Definitions:

Willingness To Pay

The maximum amount an individual is prepared to sacrifice to procure a good or service or to avoid something undesirable.

Expected Revenue

Expected revenue is the amount of money a business anticipates earning over a specified period, often based on historical data and future projections.

Probability Distribution

A mathematical function that gives the probabilities of occurrence of different possible outcomes for an experiment.

English Auction

A type of auction where bidders publicly submit higher and higher bids, with the highest bidder winning the item.