The Substitution Effect of an Increase in the Price of Raisin

question 1

Multiple Choice

The substitution effect of an increase in the price of Raisin Bran refers to

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

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Definitions:

Division of Labor

The allocation of different tasks to different people or groups in a society, aimed at increasing efficiency and productivity in the production process.

Collective Conscious

An aggregation of mutual convictions, notions, and ethical positions that function as a consolidating power within a community.

Mechanical Societies

Term used by Émile Durkheim to describe simple, traditional societies connected by similarities and communal bonds rather than complex division of labor.

Organic Societies

Refers to social systems perceived as living organisms, where different parts work together harmoniously, often used to describe pre-modern societies.