To derive the demand curve for a good the
A)income effect must be greater than the substitution effect.
B)substitution effect must be greater than the income effect.
C)substitution effect must be in the same direction as the income effect.
D)income effect and the substitution effect may work in the same or in opposite directions.

Question

Quizplus · Accepted Answer

Both the income effect and the substitution effect can affect the demand for a good, and they may work in the same or opposite directions. Therefore, the only accurate statement is that the income effect and the substitution effect may work in the same or in opposite directions.

To Derive the Demand Curve for a Good the