(C) Suppose a normal good X. Its price increases from pr to p > Pr. The quantity demanded of good X is q. Which of the following is true ? (a) The substitution effect increases q but the income effect decreases q and over- come the substitution effect. Overall q decreases. (b) The substitution effect decreases q but the income effect increases q come the substitution effect. Overall q increases. and over- (c) Both the income and substitution effects increase q. Overall increases. (d) Both the income and substitution effects decrease q. Overall q decreases. (D) Suppose an inferior good X (not Giffen). Its price increases from p, to p > Pr. The quantity demanded of good X is q. Which of the following is true ? (a) The income effect increases q but the substitution effect decreases q and over- come the income effect. Overall q decreases.

(C) Suppose a normal good X. Its price increases from pr to p > Pr. The quantity demanded of good X is q. Which of the following is true ? (a) The substitution effect increases q but the income effect decreases q and over- come the substitution effect. Overall q decreases. (b) The substitution effect decreases q but the income effect increases q come the substitution effect. Overall q increases. and over- (c) Both the income and substitution effects increase q. Overall increases. (d) Both the income and substitution effects decrease q. Overall q decreases. (D) Suppose an inferior good X (not Giffen). Its price increases from p, to p > Pr. The quantity demanded of good X is q. Which of the following is true ? (a) The income effect increases q but the substitution effect decreases q and over- come the income effect. Overall q decreases.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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