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Which of the Following Statements Is Correct

Question 3

Multiple Choice

Which of the following statements is correct?


A) The income effect explains why a price change causes both the demand curve and the supply curve to shift to the right or to the left.
B) The income effect explains why a price change causes a movement along a given demand curve.
C) The income effect explains why a price change causes a movement along a given supply curve.
D) The income effect explains why a price change causes the entire demand curve to shift to the right or to the left.

Correct Answer:

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