Economics 9708 · AS & A Level · Indifference curves and budget lines

Indifference curves and budget lines — practice question

Whenever the price of a good alters, the change in quantity demanded is caused by an income effect and a substitution effect. Which statement about these effects is always true?

  • AFor inferior goods, the income effect and substitution effect work in the same direction.
  • BFor inferior goods, the substitution effect outweighs the income effect.
  • CFor normal goods, the income effect and substitution effect work in the same direction.
  • DFor normal goods, the income effect outweighs the substitution effect.

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