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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