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Economics
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Which of the following describes the substitution effect of a price change?
 
a. The change in demand that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of a price change on consumer purchasing power.
 
b. The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant.
 
 

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Alice Sejake
Alice SejakeLv10
10 Oct 2020
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Related questions

The substitution effect of a price change refers to
A) the change in quantity demanded that results from a change in price making a good more
or less expensive relative to other goods that are substitutes.
B) the shift of a demand curve when the price of a substitute good changes.
C) the movement along the demand curve due to a change in purchasing power brought
about by the price change.
D) the shift in the demand curve due to a change in purchasing power brought about by the
price change.

The income effect of an increase in the price of salmon

a. is the change in the demand for salmon when income increases.

b. refers to the relative price effect - salmon is more expensive compared to other types of fish - which causes the consumer to buy less salmon.

c. refers to the effect on a consumer's purchasing power, which causes the consumer to buy less salmon, holding all other factors constant.

d. is the change in the demand for other types of fish, say trout, that results from a decrease in purchasing power.

Which of the following best describes the aggregate demand curve?
a. As the aggregate price level decreases, the stock of existing physical capital increases.
b. As the aggregate price level increases, consumer expectations about the future change.
c. An increase in the aggregate price level causes consumer and investment spending to fall because consumer purchasing power decreases and money demand increases.
d. As a good's price increases, holding all else constant, the good's quantity demanded decreases.

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