Consider the Indifference Curve Map and Budget Constraint for Two

question 135

Multiple Choice

Consider the indifference curve map and budget constraint for two goods, X and Y. Suppose the good on the horizontal axis, X, is normal. When the price of X increases, the substitution effect

• A) and income effect both cause an increase in the consumption of X.
• B) causes a decrease in the consumption of X, and the income effect causes an increase in the consumption of
• C) causes an increase in the consumption of X, and the income effect causes a decrease in the consumption of
• D) and income effect both cause a decrease in the consumption of X.

Evaluate how government deficits affect intergenerational standard of living.

Understanding the significance of opportunity costs and how they impact project evaluation.

Recognizing the importance of accurately estimating project cash flows and the challenges involved.

Differentiating between cash flow and accounting income in capital budgeting decisions.

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