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:

Undefined Slope

Refers to the slope of a vertical line in coordinate geometry, which cannot be calculated as it would involve division by zero.

Line

In geometry, a straight one-dimensional figure having no thickness and extending infinitely in both directions.

Points

Specific locations in space that are defined by their coordinates.

Slope-Intercept Form

The equation of a straight line in the form y = mx + b, where m is the slope and b is the y-intercept.