Economics (AS & A Level) · Feb / March 2023 · Paper 32 · Question 3

The diagram shows the effect of a price change on an individual consumer's equilibrium, moving from E1 to E2. What can be deduced from the diagram about the price change, the substitution effect and the income effect?

1. Aprice of X falls; substitution effect positive; income effect positive
2. Bprice of X falls; substitution effect positive; income effect negative
3. Cprice of Y rises; substitution effect negative; income effect positive
4. Dprice of Y rises; substitution effect negative; income effect negative

As printed in the paper