Figure 7-1

-Refer to Figure 7-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q₁ to Q₀.This change in quantity demanded is due to
A) the price and output effects.
B) the income and substitution effects.
C) the fact that marginal willingness to pay falls.
D) the law of diminishing marginal utility.

Question

Figure 7-1
 
-Refer to Figure 7-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q₁ to Q₀.This change in quantity demanded is due to
A) the price and output effects. 
B) the income and substitution effects. 
C) the fact that marginal willingness to pay falls. 
D) the law of diminishing marginal utility.

Quizplus · Accepted Answer

The decrease in quantity demanded due to an increase in price is a result of the substitution effect (consumers switching to alternatives due to the higher price) and the income effect (consumers' purchasing power is reduced by the higher price). The other options are not applicable in this scenario.

Figure 7-1 -Refer to Figure 7-1.When the Price of Hoagies Increases from of Hoagies