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The following are true statements about the income and substitution effect and the optimal consumer's allocation, EXCEPT:
Options:
-For a given increase in Px, the Income Effect measures the change in optimal consumer's allocation (x*, y*) coming from a simulated decrease in income, assuming prices stay the same.
-For a given increase in Px, the Substitution Effect measures the change in optimal consumer's allocation (x*, y*) coming from a simulated change in budget constraint such that prices are changing, but the level of utility attained (U1) is the same.
-If two goods are close Substitutes, then Substitution Effect is expected to be stronger than Income Effect.
-Income Effect will always be stronger than Substitution Effect as long as (X,Y) are normal goods.
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