Introduction to Economics 1 Deneme Sınavı Sorusu #719233
I. The income effect is the change in consumption that results when a price change moves the consumer along an indifference curve to a point with a different marginal rate of substitution. II. The substitution effect is the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve. III. The income effect may work in reverse direction for some types of goods known as inferior goods.Which of the statements given for the income and substitution effects are true?
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Only I |
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Only II |
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Only III |
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I and II |
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I and III |
I. The income effect is the change in consumption that results when a price change moves the consumer along an indifference curve to a point with a different marginal rate of substitution. (False, The income effect is the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve. )
II. The substitution effect is the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve. (False, The substitution effect is the change in consumption that results when a price change moves the consumer along an indifference curve to a point with a different marginal rate of substitution. )
III. The income effect may work in reverse direction for some types of goods known as inferior goods. (True)
The true answer is C.
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