What is income effect?
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23) 23) 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 positive and exceeds the substitution effect. B) The income effect is negative and just about offsets the substitution effect. C) The income effect is negative and reinforces the substitution effect. D) The income effect is negative and exceeds the substitution effect. E) The income effect is positive and reinforces the substitution effect.
27) What is the relationship between goods and the income effect? A) An inferior good has a positive income effect. B) A normal good has a positive income effect. C) An inferior good has no income effect. D) A normal good has no income effect. E) A normal good has a negative income effect.
62) For Lorne, a move from a to b reflects A) A pure income effect. B) A pure substitution effect. C) An income effect that is stronger than the substitution effect. D) A substitution effect that is stronger than the income effect. E) A substitution effect and an income effect that work in the same direction.