The Demand Curve for Canned Peas Is Downward Sloping

question 221

Multiple Choice

The demand curve for canned peas is downward sloping. If the price of canned peas, an inferior good, rises,

• A) the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded.
• B) the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in quantity demanded.
• C) both the income and substitution effects reinforce each other to decrease the quantity demanded.
• D) the income and substitution effects offset each other, but the price effect of an inferior good leads you to buy more canned peas.

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Definitions:

Interest

The expense associated with taking out a loan, usually represented as a yearly percent of the total loan value.

Years

A measurement of time equal to 365 days (or 366 days in a leap year), used to denote the duration or age of something.

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An insurance product that pays out income, typically used as a retirement strategy to provide individuals with a steady income in their post-work years.

Rate of Return

Net profit or net loss from an investment during a specified time span, presented as a percentage of the investment's initial financial input.