For a low-priced good,the ________ is generally negligible and the substitution effect tends to ________.
A) maximization point; disappear
B) maximization point; magnify
C) real-income effect; yield
D) real-income effect; dominate
E) complement effect; increase

Question

Quizplus · Accepted Answer

For a low-priced good, the consumer's real-income effect dominates as a small change in price will have a greater impact on their purchasing power for that good. As a result, the substitution effect tends to disappear or be negligible. Therefore, the correct answer is D, real-income effect; dominate.

For a Low-Priced Good,the ________ Is Generally Negligible and the Substitution