Use the Following to Answer Questions

question 14

Multiple Choice

Use the following to answer questions :
-(Figure: Kristin's Budget Line) Use Figure Kristin's Budget Line.The price of a cup of cappuccino is $3,and the price of an apple is $1.Suppose Kristin initially consumes 10 cups of cappuccino and 30 apples.Then the price of apples increases to $3 each and the price of cappuccino remains unchanged.As a result of this price change,Kristin's optimal consumption bundle is now nine cups of cappuccino and 11 apples.If Kristin's income could be adjusted so that she could maintain her initial level of utility after the price change,she would consume more cappuccino and more apples.This reflects:

• A) a substitution effect from the price change and an income effect from the income change.
• B) the substitution effect alone.
• C) the income effect alone.
• D) neither a substitution nor an income effect.

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Definitions:

Grade 9

A level of education in many school systems around the world, typically representing the ninth year of formal schooling for students, often in early adolescence.

Lower Unemployment

A situation or condition where there is a decrease in the number of people who are actively seeking work but are unable to find employment.

Higher Education

Education provided by universities and other institutions that award academic degrees, such as colleges and vocational schools.

Grade Inflation

The tendency over time for academic grades to become progressively higher, often without a corresponding increase in learning or achievement.