Consider the Indifference Curve Map and Budget Constraint for Two

question 158

Multiple Choice

Consider the indifference curve map and budget constraint for two goods (B and K) .Suppose the good on the horizontal axis (K) is inferior and Giffen.When the price of the inferior good on the horizontal axis (K) increases

• A)the substitution effect causes an increase in the consumption of K and the income effect causes a decrease in the consumption of K.However, the substitution effect is less than the income effect.
• B)the substitution effect causes a decrease in the consumption of K and the income effect causes an increase in the consumption of K.However, the substitution effect is greater than the income effect.
• C)the substitution effect causes an increase in the consumption of K and the income effect causes a decrease in the consumption of K.However, the substitution effect is greater than the income effect.
• D)the substitution effect causes a decrease in the consumption of K and the income effect causes an increase in the consumption of K.However, the substitution effect is less than the income effect.

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