When the Price of a Product Rises, Consumers with a Given

question 78

Multiple Choice

When the price of a product rises, consumers with a given money income shift their purchases to other products whose prices are now relatively lower. This statement describes

• A) an inferior good.
• B) the rationing function of prices.
• C) the substitution effect.
• D) the income effect.

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Definitions:

Replacement Cost

The amount required to replace an asset at current prices, ensuring similar functionality or capacity.

Inventory Turnover

A measure of how many times a company's inventory is sold and replaced over a certain period, indicating the efficiency of inventory management.

LIFO

In the Last In, First Out method, the newest items in the inventory are the first to be sold.

Inventory Turnover

A financial ratio that measures the number of times a company sells and replaces its stock of goods during a given period, indicating efficiency in inventory management.