Question

Which of the following statements is true? I. When a good absorbs only a small share of consumer spending, the income effect explains the demand curve’s negative slope. II. A change in consumption brought about by a change in purchasing power describes the income effect. III. In the case of an inferior good, the income and substitution effects work in opposite directions.

Answer 1

The answer to this question is the option (II and III).

Explanation:

In this question, both (II and III) option is correct because A difference in destruction brought about by a shift in acquiring power represents the revenue effect. In the case of a minor good, the assets and replacement impacts work in different directions. So the option for both options is correct.