Question
Please help to choose the correct answer for the following multiple choice question and explain why. Thank You. Question: Suppose the price of a good
Please help to choose the correct answer for the following multiple choice question and explain why. Thank You.
Question:
Suppose the price of a good rises. The income effect
a) shows the change in consumption that results from the change in the relative price while staying on the same indifference curve.
b) is shown by increasing income at the new relative price in order to move from the old indifference curve to the new indifference curve after the price change
c) is shown by decreasing income at the new relative price in order to move from the old indifference curve to the new indifference curve after the price change
d) shows the change in consumption that results from the change in the relative price while keeping income constant.
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