Figure 10.4 -Refer to Figure 10.4.Which of the following is true at W₀? A) The income effect is larger than the substitution effect. B) The substitution effect is larger than the income effect. C) The income effect and the substitution effect are equal. D) The supply curve is positively sloped.

Question

Quizplus · Accepted Answer

At point W₀, the substitution effect is larger than the income effect, which is reflected in the negative slope of the demand curve. Therefore, choice B is correct. Choices A and C are incorrect because they suggest that either the income effect is larger or the two effects are equal, which is not the case at this point. Choice D is incorrect because the graph does not provide information about the slope of the supply curve.

Figure 10.4 -Refer to Figure 10.4.Which of the Following Is True at Is