The Real-Income Effect of a Price Change Is Most Significant

question 29

Multiple Choice

The real-income effect of a price change is most significant when

• A) the substitution effect is insignificant.
• B) the substitution effect is significant too.
• C) the good under consideration constitutes a major portion of the consumer's budget.
• D) the marginal utility per dollar spent on the last unit is high.

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Definitions:

Customers

Individuals or entities that purchase goods or services from a company or business.

Managerial Accounting

The practice of analyzing, interpreting, and communicating financial information for internal use by management for decision making.

External Users

Individuals or entities outside a company who use financial information to make decisions about the company, such as investors, creditors, and regulatory agencies.

Internal Users

Individuals within an organization, such as management and employees, who use financial information to make decisions regarding the operation of the company.