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nalin [4]
2 years ago
15

If consumer has rational, monotonic and convex preferences, which of the following is true concerning the substitution effect of

a decrease in price of good X.
A) It always will lead to an increase in consumption of good X.
B) It will lead to an increase in consumption of good X only if X is a Giffen good.
C) It will lead to an increase in consumption of good X only if X is an inferior good.
D) It will lead to an increase in consumption of good X only if X is a normal good.
Business
1 answer:
Zanzabum2 years ago
5 0

Answer:

It will lead to an increase in consumption of good X only if X is a normal good ( D )

Explanation:

If consumer has rational, monotonic and convex preference the decrease in price of good X will lead to an increase in consumption of good X only if X is a Normal good .

This is because the demand for Normal goods increases with increase in consumers income. therefore <em>a decrease in price will automatically lead to an increase in demand because of the increase in the purchasing power of the consumer's income.</em>

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<h3>What is common-size statement?</h3>

An income statement that expresses each line item as a percentage of a base amount is known as a common-size income statement. Typically, this refers to overall earnings or total sales. Financial ratio analysis's objective is comparable to that of a common-size income statement. Items are shown as a percentage of a common base amount, such as total sales revenue, in a financial statement of common size. This kind of financial statement makes it simple to compare one company to another or different time periods within the same company.

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To learn more about common-size statement refer to:

brainly.com/question/14275288

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