The Real-Income Effect of a Price Change Is Most Significant

question 29

Multiple Choice

The real-income effect of a price change is most significant when

• A) the substitution effect is insignificant.
• B) the substitution effect is significant too.
• C) the good under consideration constitutes a major portion of the consumer's budget.
• D) the marginal utility per dollar spent on the last unit is high.

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Definitions:

Consignor

An entity or person that sends goods to another, the consignee, who agrees to sell those goods on behalf of the consignor.