Multiple Choice
Assume convex preferences and a negative cross price elasticity. If the price of good 1 increases, the substitution effect causes
A) consumption of good 1 to rise and good 1 to fall
B) consumption of good 2 to rise and good 1 to fall
C) consumption of good 2 to fall and good 1 to fall
D) consumption of good 1 to fall and good 2 to remain unchanged
Correct Answer:
Verified
Correct Answer:
Verified
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