FIGURE 6-4
-Refer to Figure 6-4. For both goods, the price falls from P0 to P1. The substitution effect is illustrated by the change in quantity demanded from A to B; the income effect is illustrated by the change in quantity demanded from B to C. Good X is certainly an) good.
A) normal
B) inferior
C) luxury
D) necessity
E) Giffen

Question

FIGURE 6-4
-Refer to Figure 6-4. For both goods, the price falls from P0 to P1. The substitution effect is illustrated by the change in quantity demanded from A to B; the income effect is illustrated by the change in quantity demanded from B to C. Good X is certainly an) good.
A) normal 
B) inferior 
C) luxury 
D) necessity 
E) Giffen

Quizplus · Accepted Answer

The substitution effect moves the quantity demanded from A to B, and the income effect moves it from B to C. Since the income effect leads to a decrease in quantity demanded when the price falls, Good X is an inferior good.

FIGURE 6-4 -Refer to Figure 6-4. for Both Goods, the Price Falls