The Substitution Effect of an Increase in the Price of Cornflakes

question 53

Multiple Choice

The substitution effect of an increase in the price of Cornflakes refers to

• A) the decrease in the demand for Cornflakes when its price rises.
• B) the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Cornflakes shifts to the left.
• C) the fact that the higher price of Cornflakes lowers consumers' purchasing power, holding money income constant.
• D) the fact that the higher price of Cornflakes relative to its substitutes, such as Cheerios, causes consumers to buy less Cornflakes.

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Definitions:

Expected Frequency

The predicted count of occurrences in each category of a statistical distribution, used as a comparison in chi-square tests.

Type B

A personality typology that describes individuals as more relaxed, non-competitive, and generally less stressed than their Type A counterparts.

Expected Frequency

The theoretical frequency of an event or category based on a probability distribution in statistical analysis.

Expected Frequency

The theoretical frequency or count of occurrences predicted for a category within a distribution, based on probability calculations.