If you were running an advertising campaign for designer men’s suits, you should target families with:

  • Higher incomes
The substitution affect isolates the change in the consumption of a good caused by:
  • The change in the market rate of substitution

How does a decrease in the price of good X affect the market rate of substitution between goods X and Y?

  • It decreases
What are the advantages to a firm of selling gift certificates?
  • Reduced strain on the refund department and greater quantity if your good is an inferior good

If you are in the business of selling chicken and the price of selling chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken?

  • Increase the inventory
After a price decrease for good X, the new consumer equilibrium level of good X will be:
  • Indeterminate without more information

Given that income is $500 and PX = $20 and PY = $5, what is the market rate of substitution between goods X and Y?

  • -4

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and PX = $5, PY = $10, X = 20, and M = 500?

  • 40

The idea that a consumer is limited to selecting a bundle of goods that is affordable is captured by the:

  • Budget constraint