A consumer, who has a fixed income in dollars, consumes petrol and bread. Suppose that demand...

  

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A consumer, who has a fixed income in dollars, consumes petrol and bread. Suppose that demand for each good increases with income. When the price of petrol increases, ceteris paribus: A. The substitution effect on the consumption of petrol is positive, as the consumer would have to increase his expenditure on petrol due to its higher price. B. The income effect on the consumption of bread is negative, i.e. the consumer would consume less bread. C. If the income effect dominates the substitution effect, then the consumer would consume more bread. D. If the income effect dominates the substitution effect, then the consumer would consume more petrol. A consumer, who has a fixed income in dollars, consumes petrol and bread. Suppose that demand for each good increases with income. When the price of petrol increases, ceteris paribus: A. The substitution effect on the consumption of petrol is positive, as the consumer would have to increase his expenditure on petrol due to its higher price. B. The income effect on the consumption of bread is negative, i.e. the consumer would consume less bread. C. If the income effect dominates the substitution effect, then the consumer would consume more bread. D. If the income effect dominates the substitution effect, then the consumer would consume more petrol. A consumer, who has a fixed income in dollars, consumes petrol and bread. Suppose that demand for each good increases with income. When the price of petrol increases, ceteris paribus: A. The substitution effect on the consumption of petrol is positive, as the consumer would have to increase his expenditure on petrol due to its higher price. B. The income effect on the consumption of bread is negative, i.e. the consumer would consume less bread. C. If the income effect dominates the substitution effect, then the consumer would consume more bread. D. If the income effect dominates the substitution effect, then the consumer would consume more petrol.

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The image presents a question related to economics specifically about the effects of price changes on the consumption of goods It reads as follows A c... View the full answer