Asked by Katelyn Holmquist on Apr 24, 2024
Verified
Identify the correct statement.
A) If the price level increases,we feel poorer and buy less.
B) If the price level increases,we feel richer and buy more.
C) If domestic prices increase,we substitute domestic goods for imported ones.
D) An increase in the price of a particular good leads to a substitution.
E) A decrease in the price of a particular good is like an increase in income and therefore we buy more.
Price Level
The average of current prices across the entire spectrum of goods and services produced in the economy, reflecting inflation or deflation.
- Identify the relationship between price levels, income, and consumer purchasing behavior.
Verified Answer
AS
Ayaka Sakai7 days ago
Final Answer :
A
Explanation :
With an increase in the price level, the purchasing power of individuals decreases, which makes them feel poorer. As a result, they tend to buy less. Option B is incorrect because an increase in the price level does not make people feel richer. Option C is incorrect because an increase in domestic prices does not necessarily lead to a substitution of domestic goods for imported ones. Option D is only applicable to a particular good and not the general price level. Option E is incorrect because a decrease in the price of a particular good may not necessarily lead to an increase in demand for it or overall expenditure on it.
Learning Objectives
- Identify the relationship between price levels, income, and consumer purchasing behavior.