Suppose that consumers’ preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good and that the price of good Y increases. Then, which of the following effect is known with certainty.
Note
Suppose that consumers' preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good and that the price of good Y increases. Then, which of the following effect is known with certainty.Answer:The income and substitution effect will have competing effects leading to an indeterminate impact on the consumption of good Y.