Suppose the price of potatoes falls and we observe a decrease in an individual's purchases of potatoes. Which of the following can we infer? a. The substitution effect outweighs the income effect. b. The income effect just offsets the substitution effect. c. The income effect is negative and reinforces the substitution effect. d. The income effect is positive and exceeds the substitution effect. e. The income effect is negative and outweighs the substitution effect.

Question 4 The utility function is x+min(6,y). Income is 12, price of good x is 3. Price of good y decreased from 4 to 1. What are the income and substitution effects of this price change for both goods? Edit Viou

Why do we decompose the price effect into income and substitution effects?

Economic

Please see below. I need help with these. Note this goes together.

Chapter 7 i 3:06 BO ☐ The substitution effect. Multiple Choice is generally so weak that its effect cannot be predicted. for an increase in the relative price of a good is sometimes positive but sometimes negative. refers to the change in the quantity demanded of a good due to a change in its relative price. measures the change in the quantity of a good demanded brought about by a change in real income associated with a change in the price of the good. 60 Saved SEP 6