Identify the statement that is true.Assume that the price of good increases.
A) If x is a normal good, both the income and substitution effects lead to a fall in consumption of x.
B) The substitution effect leads to a decrease in consumption of x only if x is an inferior good.
C) If x is a normal good, the substitution effect alone leads to a decrease in consumption of x.
D) If x is an inferior good, the income effect alone leads to a decrease in consumption of good x.

Question

Identify the statement that is true.Assume that the price of good  increases.
A) If x is a normal good, both the income and substitution effects lead to a fall in consumption of x. 
B) The substitution effect leads to a decrease in consumption of x only if x is an inferior good. 
C) If x is a normal good, the substitution effect alone leads to a decrease in consumption of x. 
D) If x is an inferior good, the income effect alone leads to a decrease in consumption of good x.

Quizplus · Accepted Answer

The Answer of Identify the statement that is true.Assume that the price of good  increases.
A) If x is a normal good, both the income and substitution effects lead to a fall in consumption of x. 
B) The substitution effect leads to a decrease in consumption of x only if x is an inferior good. 
C) If x is a normal good, the substitution effect alone leads to a decrease in consumption of x. 
D) If x is an inferior good, the income effect alone leads to a decrease in consumption of good x.

Identify the Statement That Is True