Joe consumes only two goods, and . Suppose that he always increases his quantity consumed of when the price of rises. Then we can infer that
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2 marks, −1MicroeconomicsDemand theory and elasticityIncome and substitution effects: the Slutsky equationModerateabout 2 min
JNU SIS 2015 Question 32: Demand theory and elasticity
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Joe consumes only two goods, X and Y. Suppose that he always increases his quantity consumed of Y when the price of Y rises. Then we can infer that (A) X is a normal good (B) Y is a normal good (C) X is an inferior good (D) Y has a price elasticity of demand of zero
Demand theory and elasticity has come up 161 times in 7 exams since 2004.
What this question tests
This question is on Income and substitution effects: the Slutsky equation, part of Demand theory and elasticity in Microeconomics.
Splitting a price change into a substitution effect and an income effect, and why Giffen goods break the law of demand.
TestStop has 29 past-paper questions on this subtopic.
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Question from the JNU SIS 2015 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.