The Effect of an Increase in Consumer Income on Equilibrium

question 32

Multiple Choice

The effect of an increase in consumer income on equilibrium price and quantity of Florida orange juice (a normal good) is

• A)to increase equilibrium price and quantity
• B)to decrease equilibrium price and quantity
• C)to increase equilibrium price and decrease equilibrium quantity
• D)to increase equilibrium quantity and decrease equilibrium price
• E)that equilibrium price and quantity remain constant

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Definitions:

Negotiated Price Approach

A pricing strategy where the final sell price of a product or service is determined through negotiation between the buyer and the seller.

Minimum Acceptable Return

The lowest return on investment that a person or entity is willing to accept, often used in capital budgeting and investment planning.

Invested Assets

Assets that are allocated into various investment vehicles such as stocks, bonds, real estate, or other securities with the expectation of earning a return.

Operating Income

The profit realized from a business's operations, after deducting operating expenses like wages and cost of goods sold from gross profit.