Multiple Choice
Suppose the price of potatoes falls and there is a decrease in the purchases of potatoes, what can we infer?
A) The income effect is negative and exceeds the substitution effect.
B) The income effect is negative and reinforces the substitution effect.
C) The income effect is positive and exceeds the substitution effect.
D) The income effect is positive and reinforces the substitution effect.
E) The income effect is negative and just about offsets the substitution effect.
Correct Answer:
Verified
Correct Answer:
Verified
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