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.