If the price of an inferior good falls, which of the following statements about the price effect is correct?

Question

Accepted Answer

The income effect works in the opposite direction to the substitution effect.

Answer

The substitution effect works in the same direction as the income effect.

Answer

The substitution effect is negative, and the income effect is positive.

Answer

The substitution effect is positive and no income effect occurs.

Answer

The income effect is negative and no substitution effect occurs.

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