The Demand Curve for Canned Peas Is Downward Sloping

question 88

Multiple Choice

The demand curve for canned peas is downward sloping.If the price of canned peas, an inferior good, rises, then

• A)the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded.
• B)the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in quantity demanded.
• C)both the income and substitution effects reinforce each other to decrease the quantity demanded.
• D)the income and substitution effects offset each other but the price effect of an inferior good leads you to buy more canned peas.

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Definitions:

Net Income

The amount of earnings left after all business expenses, including taxes, operating costs, and interest, have been subtracted from total revenue.

Trend Analysis

Trend analysis is a technique used in financial analysis and business strategy to identify patterns and predict future movements in data over time, often utilized for revenue, expenses, and stock prices.

Horizontal Analysis

A financial analysis technique that compares line items in financial statements over multiple periods to identify trends and changes.

Horizontal Analysis

A financial analysis technique that compares historical financial information over a series of reporting periods to identify trends and growth patterns.