An increase in real dividend income minus taxes represents
A)a combination of income and substitution effects.
B)a pure income effect.
C)a pure substitution effect.
D)an income effect that is greater than the substitution effect.
E)neither a pure income effect nor a pure substitution effect.

Question

Quizplus · Accepted Answer

An increase in real dividend income minus taxes represents a pure income effect, as the increase in income leads to an increase in purchasing power. There is no substitution effect involved as there is no change in the relative prices of goods.

An Increase in Real Dividend Income Minus Taxes Represents