Consumer Behavior - Consumer Behavior 1. The income effect...

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Consumer Behavior 1. The income effect indicates that: A) a rise in money income will cause consumers to buy smaller quantities of normal goods. B) when the price of a product falls, the lower price will induce the consumer to buy more of that product now that it is relatively cheaper. C) consumers should substitute among various products until the marginal utility from the last unit of each product purchased is the same. D) when the price of a product falls, a consumer will be able to buy more of it with a specific money income. 2. If the price of normal good X rises, the income: A) and substitution effects will both induce the consumer to buy less of X. B) and substitution effects will both induce the consumer to buy more of X. C) effect will induce the consumer to buy more of X and the substitution effect will induce him to buy less. D) effect will induce the consumer to buy less of X and the substitution will induce him to buy more. 3. The substitution effect indicates that: A) a decline in money income will cause the consumer to buy more inferior goods and fewer superior goods. B) consumer equilibrium can only be achieved when the consumer is buying substitute goods. C) when the price of a product falls, the lower price will induce the consumer to buy more of that product at the expense of other products. D) when the price of a product falls, a consumer will be able to buy more of it with a specific money income. 4. The substitution effect causes a consumer to buy less of a product when its price rises because the: A) consumer's real income has decreased. B) consumer's real income has increased. C) product is now less expensive compared to other products.
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D) product is now more expensive compared to other products. Utility; law of diminishing marginal utility
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Consumer Behavior - Consumer Behavior 1. The income effect...

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