Author Question: Marginal utility theory predicts that when the price of one good rises, the demand for another good ... (Read 140 times)

asmith134 · **on:** Jun 29, 2018

Marginal utility theory predicts that when the price of one good rises, the demand for another good is a substitute increases. This change occurs because of

A) an increase in the marginal utility per dollar from the substitute good.
B) an increase in the marginal utility of the substitute good.
C) a decrease in the marginal utility per dollar from the good whose price has risen.
D) a decrease in the marginal utility of the good whose price has risen.

Question 2

What effect does an increase in the interest rate have on the opportunity cost of holding money and on the demand for money curve?

What will be an ideal response?

jessicaduplan · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

C

Answer to Question 2

An increase in the interest rate increases the opportunity cost of holding money. There is a movement upward along the demand for money curve.