Economics (AS & A Level) · May / June 2026 · Paper 32 · Question 7

The diagram uses indifference curves and budget lines to examine the impact of a change in the price of wheat. A change in price shifts the consumption of maize and wheat from S to T. Which combination of statements correctly explains what the diagram shows?

1. Athe price of wheat has decreased; the substitution effect is shown by the shift from S to U
2. Bthe price of wheat has increased; wheat is a normal good
3. Cwheat is a Giffen good; the income effect is shown by the shift from S to W
4. Dwheat is a Giffen good; the substitution effect outweighs the income effect

As printed in the paper