The Income Effect

question 50

Multiple Choice

The income effect

• A)Moves in the opposite direction from the substitution effect for an inferior good
• B)Moves in the same direction as the substitution effect for an inferior good
• C)Relates to increases in nominal rather than real income
• D)Is always greater than the substitution effect

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Definitions:

Data

Information collected and used for analysis or decision making, often in a structured form.

Common Size Percentages

Ratios used in financial analysis that express each line item on a financial statement as a percent of a base amount, facilitating comparison.

Operating Expenses

Costs incurred in the day-to-day operations of a business, excluding the cost of goods sold, such as rent, utilities, and salaries.