Cola is a normal good. If the price of cola falls, which of the following statements about the price effect of the fall in the price of cola is correct?

Question

Answer

As price falls, there is a substitution effect but no income effect.

Answer

The income effect is positive, but the substitution effect is negative.

Answer

The income effect dominates the substitution effect.

Answer

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

Answer

The income effect reinforces the substitution effect.

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Cola is a normal good. If the price of cola falls, which of the following statem...

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