Rob consumes two goods, x and y.He has an allowance of $50 per week and is not endowed with either of the goods.If the price of good x increases and his substitution and income effects change demand in opposite directions,
A)good x must be a Giffen good.
B)good x must be an inferior good.
C)WARP is violated.
D)good x must be a normal good.
E)There is not enough information to judge whether good x is a normal or inferior good.

Question

Quizplus · Accepted Answer

When the substitution and income effects move in opposite directions, the good is typically an inferior good.

Rob Consumes Two Goods, X and Y