When income effects are small:
A) there is no difference between the uncompensated demand curve and the uncompensated demand curve.
B) the uncompensated demand curve will be relatively far from the compensated demand curve.
C) the compensated demand curve will intersect the uncompensated demand curve.
D) the uncompensated demand curve lies close to the compensated demand curve.

Question

Quizplus · Accepted Answer

When income effects are small, the change in demand due to a change in price (uncompensated demand curve) is not significantly different than the change in demand due to a change in real income (compensated demand curve). This means that the uncompensated demand curve lies close to the compensated demand curve.

When Income Effects Are Small