Ayushi posted an Question
September 09, 2020 • 16:49 pm 30 points
  • UGC NET
  • Economics

Under slutsky's substitute effect, the consumer: 1. moves on a lower indifference curve 2. moves on a higher indifference curve 3. all the three alternatives a

Under Slutsky's substitute effect, the consumer: 1. Moves on a lower indifference curve 2. Moves on a higher indifference curve 3. All the three alternatives are possible 4. Remains on the same indifference curve

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    Nidhi taparia Best Answer

    In Slutsky's approach, income is reduced or increased such that the consumer is able to purchase the same combination of goods, if he so desires. Income is reduced by cost difference, as opposed to compensating or equivalent variation in income as suggested by Hicks. To answer this question, in this approach, consumer moves to a higher indifference curve from a lower one.

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