When the price of a good falls the effect on the quantity demanded is the result of an income effect and a substitution effect. Which statement about these effects is correct?
- When the price of a good falls the effect on the quantity demanded is the result of an income effect and a substitution effect. Which statement about these effects is correct? A For inferior goods the income effect and the substitution effect work in the same direction. B For inferior, but not Giffen, goods the income effect outweighs the substitution effect. C For normal goods the income effect and substitution effect work in the same direction. D For normal goods the income effect outweighs the substitution effect.[1]
Mark scheme
Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.
- [1] C
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