Figure 4.2
A consumer's original utility maximizing market basket of goods is shown in Figure 4.2 as point A. Following a price change, the consumer's utility maximizing market basket is at point B.
-Based Figure 4.2, clothing is:

Question

Quizplus · Accepted Answer

In Figure 4.2, the price of clothing has decreased, resulting in the consumer moving to a higher indifference curve and consuming more of both goods. This implies that clothing is a normal good, as the consumer is buying more of it as their income has more purchasing power. It is not a Giffen good as the consumer did not decrease their consumption of clothing despite its lower price.

Figure 4.2 A Consumer's Original Utility Maximizing Market Basket of Goods Is