An Individual Is Considering Consumption in Two Periods

question 10

Multiple Choice

An individual is considering consumption in two periods.He has decided to borrow $1,000 in period 1,given his endowment and the interest rate.Other things remaining the same,if the interest rate increases,he will:

• A)borrow less than $1,000.
• B)continue to borrow $1,000.
• C)borrow more than $1,000.
• D)borrow more or less depending upon whether or not the substitution effect of the change is greater than the income effect.

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Definitions:

Collusive Control

A situation where firms in a market agree to set prices or output levels to maximize their collective profits, often at the expense of fair competition.

Oligopolists

Firms that are part of an oligopoly, a market structure dominated by a small number of large companies, leading to limited competition.

Elasticity of Demand

A measure of how sensitively the quantity demanded of a good responds to changes in other economic factors, such as price or consumer income.

Collusive Agreement

A secret or illegal cooperation or agreement between parties to limit competition and manipulate market conditions to their advantage.