What Is the Primary Difference Between the Substitution and the Income

question 80

Multiple Choice

What is the primary difference between the substitution and the income effect of a price change?

• A) The substitution effect holds income constant and the income effect holds utility constant.
• B) The substitution effect is always positive and the income effect is always negative.
• C) The substitution effect holds utility constant and the income effect holds prices constant.
• D) The substitution effect is always negative and the income effect is always positive.

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Definitions:

Ectoderm

The outermost layer of cells or tissue of an embryo in early development, giving rise to the epidermis and nervous system.

Oral Cavity

The mouth; consists of the space surrounded by the lips, cheeks, teeth, and palate; limited posteriorly by the fauces.

Adrenal Glands

Endocrine glands that produce a variety of hormones including adrenaline and cortisol, located above the kidneys.

Posterior Pituitary

A part of the brain that releases hormones produced in the hypothalamus, like vasopressin and oxytocin.