Asked Sep 28, 2019

(In this question we denote income by Y, not by W as in the lecture notes). The following figure shows the consumption of x and y for two market situations.

We can conclude that:

x is a normal good for all market situations.

py is greater than px.

It is not conclusive.

x is an inferior good for some market situation.

y is an inferior good for some market situation.


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Expert Answer

Step 1

Inferior good:

Inferior goods are those goods which are inversely related to the income ...

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