Which of the Following Statements About the Real-Income Effect and the Substitution

question 41

Multiple Choice

Which of the following statements about the real-income effect and the substitution effect is true?

• A) The real-income effect always exists,but the substitution effect does not always exist.
• B) The real-income effect and the substitution effect always exist.
• C) The real-income effect does not always exist,but the substitution effect always exists.
• D) The real-income effect and the substitution effect cannot occur at the same time.
• E) The real-income effect and the substitution effect occur only with an increase in price.

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