For normal good the income and substitution effects

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Reference no: EM13853261

1. Assume at the current consumption combination that the marginal utility per dollar spent from good A exceeds the marginal utility per dollar spend from good B. To increase the satisfaction associated with the amount spent, the consumption combination should have contained more A and less B.

A. True

B. False

2. For a “normal” good, the income and substitution effects are not opposing forces. That is, for a “normal” good, the substitution and income effects of an increase in the price will both cause a reduction in the quantity purchased.

A. True

B. False

3. Assuming both types of taxes collect the same number of dollars, a wage tax is preferable to a head tax.

A. True

B. False

Reference no: EM13853261

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