Which of the Following Statements Is TRUE

question 247

Multiple Choice

Which of the following statements is TRUE?

• A) When the price of oil is high, consumers will use oil for both valuable and less valuable uses.
• B) When the price of oil is low, consumers will use oil only for its most valuable uses.
• C) When the price of oil rises, consumers tend to use oil for uses in which there are few substitutes for it.
• D) When the price of oil falls, consumers start to conserve oil and only use it when there are no other options.

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Definitions:

Disposable Income

Disposable income refers to the sum of money that families can use for expenditures and savings once income taxes are deducted.

MPS (Marginal Propensity to Save)

The proportion of an increase in income that an individual or population saves rather than spends on consumption.

APC (Average Propensity to Consume)

The fraction of income that households plan to spend on goods and services; it is the ratio of total consumption to total disposable income.

Disposable Income

Refers to the amount of money that households have available for spending and saving after income taxes have been accounted for.