A4 The figure below shows a consumer maximizing utility at two different prices (the left panel) and the consumer's demand for good X at the same twoprices of good X (the right panel). The price of good Yis $14. When the price of X increases from point M to point N along the demand curve, it is clearthat good X (5, is not) a Giffen good because720N.444M.16.80Demand for XQuantity of YPrice of X Multiple ChoiceIs not; good X is an inferior good.is; the income effect is larger than the substitution effect.Is; the total effect of the price increase is negative.Is; the income effect reinforces the substitution effect.is not; the substitution effect reinforces the income etffect.

We know that the effect of price change is decomposed in substitution effect and income effect.

he figure below shows a consumer maximizing utility at two different prices (the left panel) and the consumer's demand for good X at the same two prices of good X (the right panel). The price of good Yis $14. When the price of X increases from point M to point N along the demand curve, it is clear hat good X (s. is not) a Giffen good because 720 444 16.80 Demand for X Quantity of Y Price of X