When the price of a good decreases, ceteris paribus, the lower price:
A)generally encourages the consumption of inferior goods
B)leads to a parallel shift of the linear budget constraint
C)will necessarily lead to a decrease in the consumption of goods whose price did not change
D)expands the consumer's set of buying opportunities

Question

Quizplus · Accepted Answer

When the price of a good decreases, it means that the consumer can now buy the same quantity of the good at a lower price or buy a greater quantity of the good for the same price. This expands the consumer's set of buying opportunities, which is why option D is the correct answer. Option A is incorrect because a decrease in price does not necessarily encourage the consumption of inferior goods. Option B is incorrect because a decrease in price does not lead to a parallel shift of the linear budget constraint, but rather a downward shift. Option C is incorrect because a decrease in the price of one good may actually increase the consumption of other goods.

When the Price of a Good Decreases, Ceteris Paribus, the Lower