FIGURE 6- 4
-Refer to Figure 6- 4. For both goods, the price increases 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 Y is certainly a(n) good.
A) normal
B) Giffen
C) luxury
D) necessity
E) inferior

Question

FIGURE 6- 4
-Refer to Figure 6- 4. For both goods, the price increases 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 Y is certainly a(n) good.
A) normal 
B) Giffen 
C) luxury 
D) necessity 
E) inferior

Quizplus · Accepted Answer

The decrease in quantity demanded due to the price increase (the substitution effect) is consistent with a normal good, and the increase in quantity demanded due to the decrease in real income (the income effect) is also consistent with a normal good. Therefore, good Y is a normal good.

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