A consumer makes the best affordable choice of two normal goods. When the price of one good falls, what are the substitution and income effects of the price fall?

Question

Accepted Answer

The income effect and the substitution effect are positive.

Answer

The income effect is equal and opposite to the substitution effect.

Answer

The income effect is negative and the substitution effect is positive.

Answer

The income effect is zero.

Answer

The income effect is positive and the substitution effect is negative.

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A consumer makes the best affordable choice of two normal goods. When the price ...

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