The Substitution Effect of an Increase in the Price of Peaches

question 3

Multiple Choice

The substitution effect of an increase in the price of peaches is

• A) the change in the quantity demanded that results from a change in the price of peaches making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
• B) the change in the demand for nectarines (a substitute good) that results when peaches become more expensive relative to nectarines, holding constant the effect of the price change on consumer purchasing power.
• C) the change in the quantity demanded of peaches that results from the effect of the change in the price of peaches on the consumer's purchasing power.
• D) the change in the demand for peaches that results when the price of peaches increases.

---

Definitions:

Depreciation Expense

The monetary value reduction in an asset's cost over its useful life due to wear and tear, age, or obsolescence.

Book Value

The net value of an asset according to its balance sheet account balance, calculated as the original cost minus accumulated depreciation.

Impairment Loss

The amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount.

Fair Value

The estimated market value of an asset or liability, reflecting the price it would fetch in an orderly transaction between market participants at the measurement date.