Assume you are consuming two goods,X and Y.Suppose the absolute prices for X and Y remain unchanged,but your money income falls by 50%.What happens to your consumption of good X?
A)it increases
B)it stays the same
C)it increases or decreases,depending on whether it is normal or inferior
D)it decreases
E)it decreases by 50%

Question

Quizplus · Accepted Answer

The consumption of good X will depend on whether it is a normal or inferior good. If X is a normal good, consumption will decrease as income falls. If X is an inferior good, consumption may increase as income falls.

Assume You Are Consuming Two Goods,X and Y