Unformatted text preview: (i) the good is inferior, if an increase in demand results from the income effect. (ii) the good is a Giffen good, if an increase in demand occurs. (iii) the income effect is smaller than the substitution effect if the good is a Giffen good (iv) the compensated budget line is drawn tangent to the final indifference curve at the original relative price ratio (v) the substitution effect is always negative Which of the following combinations are true? A.
E. (i), (ii) & (iii) (ii), (iii) & (v) (i), (iv) & (v) (i), (ii) & (v) Abstain 11. Consider the following statements: [Pen. 1] (i) It is possible that a consumer will pick the same market basket when faced with a choice of a cash grant or a single product subsidy of equal value. (ii) Cash grants shift part of the budget line to the right but single product cash subsidies shift the entire budget line to the right. (iii) A cash grant always allows the consumer fewer choices than a subsidized price of equal value for one commodity. (iv) A cash grant al...
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- Spring '11
- Microeconomics, representative, E. Abstain