In 2010, the average household spent $1,178 on telephone services and $333 on nonalcoholic drinks. From this information, we can conclude that:
A) the substitution effect of a price change will be larger for telephone services than for nonalcoholic drinks.
B) an increase in the price of telephone services will cause a larger income effect than a similar increase in the price of nonalcoholic drinks.
C) an increase in the price of nonalcoholic drinks will cause a larger income effect than a similar increase in the price of telephone services.
D) the substitution effect of a price change will be larger for nonalcoholic drinks than for telephone services.
Correct Answer:
Verified
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