The income effect of a price change: A. produces a backward-bending income-consumption curve. B. is always positive. C. reinforces the substitution effect in the normal good case. D. is always larger than the substitution effect in the inferior good case.

The correct answer is "C. reinforces the substitution effect in the normal good case.".

Explanation: When the Price of a Good changes, a change occurs in the Real Income. If the price of the Good falls, leaving the prices of the other Goods and the nominal Income constant, with the same Nominal Income you can acquire more of the Good whose Price fell, of other Goods or of all of them.  The opposite occurs when the Price of the good rises. Thus, a change in prices induces a change in real income.

In the case of normal goods the income effect of a price change reinforces the substitution effect because people prefer not to buy that good and replace it with a lower one that costs a lower price.

explanation:

kool beans

the investment was $14,174.196

explanation:

a lump sum means that the father of the example made one deposit and leave it be.

we need to know the value of a capital that generated at 4.05% per year during 28 years the sum of $48,613.24

now clearing the formula to solve for capital we got:

and we reach the answer investment = $14,174.20