How Does the Income Effect from the Decrease in the Price

question 10

Multiple Choice

How does the income effect from the decrease in the price of a good differ from the income effect resulting from an increase in one's income?

• A)The former moves the consumer to a higher indifference curve but the latter does not.
• B)The latter moves the consumer to a higher indifference curve but the former does not.
• C)With the price change the consumer is on a higher indifference curve but on a lower slope relative to the increase in income.
• D)There is no difference between the two.

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Definitions:

Form W-2

An annual form issued by employers to each employee, reporting the employee's yearly wages and the amount of taxes withheld from their paycheck.

Federal Unemployment Taxes

Taxes imposed on employers to fund the federal government's oversight and support of state unemployment insurance programs.

Employer

An individual or organization that hires and pays for the services of employees in exchange for their labor.