Explain the Price Effect Curve below in the case when the price of good 1 upon x-axis rises whereas the price of good 2 on y-axis remains unchanged? If we connect the points, we have the price consumption curve. It shows the utility-maximizing points when the price of a good changes. X, X, X,

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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.