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When the Price of a Good Falls, the Income Effect

Question 42

Multiple Choice

When the price of a good falls, the income effect for a normal good implies that people buy


A) less of that good because they cannot afford to buy all the things they previously bought.
B) more of that good because the relative price of the good has risen.
C) more of that good because they can afford to buy more of all the things they previously bought.
D) less of that good because the relative price of the good has fallen.

Correct Answer:

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