6. A consumer has utility function U(x, y) =x+y. The price of x is Px, the...

 

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6. A consumer has utility function U(x, y) =x+y. The price of x is Px, the price of y is Py, and the consumer's income is I. When P. decreases, about the income and substitution effects with respect to x, which of the following scenarios is NOT possible? For simplicity, assume that P, never equals Py. A. Both the income effect and the substitution effect are 0. B. Substitution effect is 0, income effect is positive. C. Income effect is 0, substitution effect is positive. D. Both the income effect and the substitution effect are positive. 6. A consumer has utility function U(x, y) =x+y. The price of x is Px, the price of y is Py, and the consumer's income is I. When P. decreases, about the income and substitution effects with respect to x, which of the following scenarios is NOT possible? For simplicity, assume that P, never equals Py. A. Both the income effect and the substitution effect are 0. B. Substitution effect is 0, income effect is positive. C. Income effect is 0, substitution effect is positive. D. Both the income effect and the substitution effect are positive.

Answer rating: 100% (QA)

ANSWER AND EXPLANATION A Both the income effect and the substitution effect are 0 This OPTIO... View the full answer