When the price of an inferior good increases,
a. both the income and substitution effects encourage the consumer to purchase more of the good.
b. both the income and substitution effects encourage the consumer to purchase less of the good.
c. the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good.
d. the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.
c
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Which of the following rules is most consistent with profit maximization?
a. expand output when MR < MC b. reduce output when MR > MC c. expand output when TR > TC d. reduce output when TR > TC e. expand output when MR > MC
A budget constraint shows
A) all of the combinations of sets of goods that yield the same level of satisfaction. B) all of the possible combinations of goods that can be purchased with a specific budget. C) all of the goods the consumer gets positive marginal utility from when the goods are consumed. D) all of the goods that a consumer substitutes for other goods when prices fall.