If the Price of Muffins, a Normal Good You Enjoy

question 118

Multiple Choice

If the price of muffins, a normal good you enjoy, rises,

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

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Definitions:

New Product

An item or service that is recently introduced to the market, offering innovative features or addressing specific consumer needs that were previously unmet.

Capitalist Income

Income generated from the ownership of capital assets, such as profits from business investments, interest on loans, or dividends from stocks.

Corporate Profits

The earnings of a corporation after all expenses have been deducted from revenues.

Labor Unions

Organizations formed by workers from related fields that work for the betterment of their members' employment conditions.