The Substitution Effect

question 105

Multiple Choice

The substitution effect

• A) occurs when utility declines as consumption increases.
• B) is the additional satisfaction derived from consuming one more unit of a good or service.
• C) is the combination of goods and services that maximizes utility for a given income.
• D) occurs when a consumer buys more of a good as a result of a relative price change.
• E) occurs when there is a change in purchasing power as a result of a change in the price of a good.

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Definitions:

Incidental Information

Information that is not purposely sought out or learned but is encountered spontaneously or accidentally.

Working Memory

The component of short-term memory dedicated to the direct conscious analysis of sensory information and language use.

Spacing Effect

The psychological phenomenon whereby learning is more effective when study sessions are spaced out over time rather than conducted in a single cramming session.

American National Exhibition

A 1959 exhibition in Moscow, showcasing American culture and technology as part of Cold War diplomacy.