If the Price of Lattes, a Normal Good You Enjoy

question 93

Multiple Choice

If the price of lattes, a normal good you enjoy, falls,

• A) the income and substitution effects offset each other but the price effect leads you to buy more lattes.
• B) both the income and substitution effects lead you to buy more lattes.
• C) the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more latte purchased.
• D) the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more latte purchased.

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Definitions:

Complementary Product

A product that adds value to another, typically unrelated product when used together.

Energy Drink

A type of beverage containing stimulant compounds, typically caffeine, designed to provide mental and physical stimulation.

Sales

The exchange of a commodity for money; the action of selling something.

Cannibalized

The phenomenon where a company's new product eats into the sales of its existing products, often unintentionally.