If the income effect of a price change is negative and larger in absolute terms than the substitution effect,then the demand curve will be
A)upward sloping.
B)downward sloping.
C)vertical.
D)horizontal.
E)of indeterminate slope.

Question

Quizplus · Accepted Answer

When the income effect of a price change is negative and larger in absolute terms than the substitution effect, it means that the consumer is worse off after the price change and is more inclined to reduce consumption. This will result in a decrease in the quantity demanded, which corresponds to an upward sloping demand curve.

If the Income Effect of a Price Change Is Negative