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3. A consumer's original utility maximizing market basket of goods is shown in the figure as Bundle 1. Following a price change, the consumer's utility maximizing market basket changes to Bundle 2. Which of the following statements is true? a. Good X is an inferior good. b. Good Y is a normal good. c. Goods X and Y are substitutes. d. Goods X does not follow the law of demand. e. None of the above.

3. A consumer's original utility maximizing market basket of goods is shown in the figure as Bundle 1. Following a price change, the consumer's utility maximizing market basket changes to Bundle 2. Which of the following statements is true? a. Good X is an inferior good. b. Good Y is a normal good. c. Goods X and Y are substitutes. d. Goods X does not follow the law of demand. e. None of the above.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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b. SE= +1 Y; IE= - 12 X c. SE= +2 Y; IE= - 12 X d. SE= +1 Y; IE= 0 X 3. A consumer's original utility maximizing market basket of goods is shown in the figure as Bundle 1. Following a price change, the consumer's utility maximizing market basket changes to Bundle 2. Which of the following statements is true? IC a. Good X is an inferior good. b. Good Y is a normal good. c. Goods X and Y are substitutes. d. Goods X does not follow the law of demand. e. None of the above.
Transcribed Image Text:b. SE= +1 Y; IE= - 12 X c. SE= +2 Y; IE= - 12 X d. SE= +1 Y; IE= 0 X 3. A consumer's original utility maximizing market basket of goods is shown in the figure as Bundle 1. Following a price change, the consumer's utility maximizing market basket changes to Bundle 2. Which of the following statements is true? IC a. Good X is an inferior good. b. Good Y is a normal good. c. Goods X and Y are substitutes. d. Goods X does not follow the law of demand. e. None of the above.
.A consumer's original utility maximizing market basket of goods is shown in the figure as Bundle A. Following a price change, the consumer's utility maximizing market basket changes to Bundle C. Which of the following statements is necessarily FALSE? 10 2 10 12 16 18 20 14 Good 1 a. Good X is a Giffen good. b. Good Y is a normal good. c. The price consumption curve as Px changes slopes upward. d. The income consumption curve slopes downward. e. Cross-price elasticity of demand for good y with respect to Px is negative. 2. Suppose an individual's utility function is U = x^(1/2) + y, and her total budget is $48. The price of y is always $8, but the price of x increases from $1 to $2. Calculate the substitution effect on y and the income effect on x. a. SE= +2 Y; IE= 0 X Good 2
Transcribed Image Text:.A consumer's original utility maximizing market basket of goods is shown in the figure as Bundle A. Following a price change, the consumer's utility maximizing market basket changes to Bundle C. Which of the following statements is necessarily FALSE? 10 2 10 12 16 18 20 14 Good 1 a. Good X is a Giffen good. b. Good Y is a normal good. c. The price consumption curve as Px changes slopes upward. d. The income consumption curve slopes downward. e. Cross-price elasticity of demand for good y with respect to Px is negative. 2. Suppose an individual's utility function is U = x^(1/2) + y, and her total budget is $48. The price of y is always $8, but the price of x increases from $1 to $2. Calculate the substitution effect on y and the income effect on x. a. SE= +2 Y; IE= 0 X Good 2
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