FIGURE 6-5
-Refer to Figure 6-5.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.

Question

FIGURE 6-5 -Refer to Figure 6-5.For both goods,the price increases from P<sub>0</sub> to P<sub>1</sub>.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) inferior B) normal C) luxury D) necessity E) Giffen

Quizplus · Accepted Answer

Since the quantity demanded of Good Y increases in response to an increase in income, it is a normal good. There is no evidence of it being a luxury good or a necessity, so options C and D can be ruled out. It also cannot be an inferior good, as the quantity demanded increases with the increase in price, which is opposite to the typical behavior of an inferior good. Finally, there is no evidence of it being a Giffen good, as the increase in quantity demanded is not a result of the good becoming relatively cheaper.

FIGURE 6-5 -Refer to Figure 6-5.For Both Goods,the Price Increases from P0

FIGURE 6-5 -Refer to Figure 6-5.For Both Goods,the Price Increases from P₀