Economics (AS & A Level) · Feb / March 2025 · Paper 32 · Question 5
9708Indifference curves and budget lines
Which statement about the downward sloping demand curve of an inferior good is correct?
- ANegative income effect and substitution effect move in opposite directions, leading to a steeper demand curve.
- BNegative income effect and substitution effect move in the same direction, leading to a flatter demand curve.
- CPositive income effect and substitution effect move in opposite directions, leading to a steeper demand curve.
- DPositive income effect and substitution effect move in the same direction, leading to a flatter demand curve.
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Correct answer: A. Negative income effect and substitution effect move in opposite directions, leading to a steeper demand curve.
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