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Economics (AS & A Level) · May / June 2022 · Paper 33 · Question 6

9708Indifference curves and budget lines

Broken rice is an inferior good. What would be the resulting income and substitution effect on the quantity demanded of broken rice if its price falls?

  1. Aincome effect: falls; substitution effect: falls
  2. Bincome effect: falls; substitution effect: rises
  3. Cincome effect: rises; substitution effect: falls
  4. Dincome effect: rises; substitution effect: rises

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Correct answer: B. income effect: falls; substitution effect: rises

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