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Income and Substitution Effects

Substitution ...

Question

Substitution effect takes place when price of the commodity becomes:

A

relatively cheap

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B

relatively dear

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C

stable

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D

both (a) and (b)

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Solution

The correct option is D
both (a) and (b)

Substitution effect takes place when price of the commodity becomes either relatively cheap or relatively dear.

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Q. When the price of a substitute of a commodity X falls, then the demand for X.

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