What Is the Effect of a Decrease in the Price

question 10

Multiple Choice

What is the effect of a decrease in the price of potato chips on the market for pretzels,a substitute good,that is initially in equilibrium?

• A)Both equilibrium price and equilibrium quantity of pretzels will increase.
• B)Both equilibrium price and equilibrium quantity of pretzels will fall.
• C)Equilibrium price will increase and equilibrium quantity of pretzels will fall.
• D)Equilibrium price will fall and equilibrium quantity of pretzels will increase.
• E)Equilibrium price and equilibrium quantity of pretzels remain unchanged.

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Definitions:

Collect

To gather or accumulate items or amounts, often used in the context of collecting funds, debts, or data.

Accounts Payable Period

The average amount of time it takes for a business to pay off its suppliers after receiving goods or services.

Cash Disbursements

Payments in cash made by a business, including expenses, dividend payments, and investment purchases.

Sales

The total amount of goods or services sold by a company, constituting its main source of revenue.