FIGURE 6- 3
-Refer to Figure 6- 3. 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 a(n) good.
A) luxury
B) normal
C) Giffen
D) inferior
E) necessity

Question

FIGURE 6- 3
-Refer to Figure 6- 3. 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 a(n) good.
A) luxury 
B) normal 
C) Giffen 
D) inferior 
E) necessity

Quizplus · Accepted Answer

The income effect shows that as the price falls, the quantity demanded decreases from B to C, indicating that Good X is an inferior good, as the consumer buys less of it when their real income increases.

FIGURE 6- 3 -Refer to Figure 6- 3. for Both Goods, the Price