II. (Fill in the blanks.) 1.Consumers will tend to buy more of the good that has become (........... ) and less of those goods that are now relatively more (........... ). This response to a change in the relative prices of goods is called the (............ ). 2.Because one of the goods is now cheaper, consumers enjoy an increase in real (........... ). The change in demand resulting from this change in real purchasing power is called the income effect. Theoretically, the income effect may be large enough to cause the demand curve for a good to slope upward. We call such a good a (...............). 3.Even with inferior goods, the income effect is rarely large enough to outweigh the substatution effect. As a result, when the price of an inferior good falls, its consumption almost always increases. Theoretically, the income effect may be large enough to cause the demand curve for a good to slope ( ..........). We call such a good a ..................( ).
II. (Fill in the blanks.)
1.Consumers will tend to buy more of the good that has become (........... ) and less of those goods that are now relatively more (........... ). This response to a change in the relative prices of goods is called the (............ ).
2.Because one of the goods is now cheaper, consumers enjoy an increase in real (........... ). The change in demand resulting from this change in real
Theoretically, the income effect may be large enough to cause the demand curve for a good to slope upward. We call such a good a (...............).
3.Even with inferior goods, the income effect is rarely large enough to outweigh the substatution effect. As a result, when the price of an inferior good falls, its consumption almost always increases. Theoretically, the income effect may be large enough to cause the demand curve for a good to slope ( ..........). We call such a good a ..................( ).
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