Suppose That the Incomes of Buyers in a Particular Market

question 45

Multiple Choice

Suppose that the incomes of buyers in a particular market for a normal good increase and there is also a reduction in input prices. What would we expect to occur in this market?

• A) The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.
• B) The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
• C) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
• D) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

---

Definitions:

Theorem

A statement or proposition that is proven on the basis of previously established statements or propositions.

Externalities

Economic side effects or consequences of a commercial activity that affect other parties without being reflected in the costs of the goods or services involved.

Negative Externality

A cost that affects a party who did not choose to incur that cost or benefit from it, often considered a failure of the market.

Market Inefficiency

A situation where market prices do not always accurately reflect the true value of a good or service, possibly due to lack of information or irrational behavior.