Suppose the price of a good X falls. As a result, the quantity demanded for good x increases for a particular consumer. For this consumer, the substitution effect induced the consumer to purchase more X while the income effect inducted the consumer to purchase less X. We can infer that

Suppose the price of a good X falls. As a result, the quantity demanded for good x increases for a particular consumer. For this consumer, the substitution effect induced the consumer to purchase more X while the income effect inducted the consumer to purchase less X. We can infer that

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter5: Income And Substitution Effects

Section: Chapter Questions

Problem 5.1P

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Concept explainers

Normal and Inferior Goods

Understanding a normal good and an inferior good is important because it tells us what will happen to demand different products during booms and recessions.

Question

Suppose the price of a good X falls. As a result, the quantity demanded for good x increases for a
particular consumer. For this consumer, the substitution effect induced the consumer to purchase more
X while the income effect inducted the consumer to purchase less X. We can infer that
a- X is a luxury good
b- X is inferior good
c- X is a Giffen good
d- X is a normal good

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