Questions 1-20 are worth 2.5 points each. Select the letter corresponding to the best answer. Questions 21 and 22 are worth 10 points each. Questions 23 and 24 are worth 15 points each.
Utility refers to a. the usefulness of a good.
The substitution effect says that consumption of good B may increase or decrease. The income effect says that the consumer should consume more of both goods. The income effect outweighs the substitution effect. Consumers spend less money on any good whose price has risen. A consumer who is given enough additional money to purchase the original bundle will purchase more of a good that has become relatively cheaper.