When a Firm in One Nation Purchases Unfinished Products Internationally

question 189

Multiple Choice

When a firm in one nation purchases unfinished products internationally and adds further processing to sell in the domestic market, this is known as:

• A) barter.
• B) offshoring.
• C) factor movement.
• D) marketing arrangements.

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Definitions:

Income Effect

The variation in income for a person or an economy and its impact on the demand for a specific good or service.

Perfect Substitutes

Goods that can serve the same purpose perfectly, where consumers are indifferent between them and will select based on price.

Giffen Good

A product that paradoxically sees an increase in demand as its price increases, violating the basic law of demand due to the income effect overshadowing the substitution effect.

Inferior Good

A type of good whose demand decreases as the income of consumers increases, opposite of a normal good.