If the Price of Orchids Falls, the Substitution Effect Due

question 74

Multiple Choice

If the price of orchids falls, the substitution effect due to the price change will cause

• A) an increase in the demand for orchids.
• B) an increase in the demand for roses, a substitute for orchids.
• C) an increase in the quantity demanded of orchids.
• D) an increase in the quantity supplied of orchids.

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Definitions:

Consumer Price Index

A gauge that calculates the mean variation in time of the prices urban consumers pay for a selection of consumer products and services.

Real Rate of Return

The annual percentage return realized on an investment, adjusted for changes in price due to inflation or other external effects.

Portfolio Value

The total worth of all the financial investments held by an individual or institution.

Compounded Quarterly

This refers to the process of applying interest to an initial amount of money (principal) four times a year, at the end of each quarter.