Question
Asked Sep 28, 2019

The following figure shows the demand curve of commodity x (for a level of income W and the prices of the other commodities constant).

The income effect due to an increase in the price of commodity x from 10 to 11 is:

Positive

Cannot be determined from the graph.

Negative

Dominated by the substitution effect

Could be positive or negative.

Pr
11
10
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Pr 11 10

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Step 1

Generally when price increases, the quantity demanded would less (law of ...

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