Question

    The substitution effect for a commodity is

    A Is always positive Correct Answer Incorrect Answer
    B Is always negative Correct Answer Incorrect Answer
    C Depends upon the nature of the commodity Correct Answer Incorrect Answer
    D Depends upon price effect Correct Answer Incorrect Answer
    E Sometimes negative and sometimes positive Correct Answer Incorrect Answer

    Solution

    The substitution effect for a commodity is always negative as it is the effect due only to the relative price change, controlling for the change in real income.

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