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Darius Helton
on Oct 27, 2024

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If the substitution effect and the income effect of a price change move in opposite directions for a particular good,then the good must be an inferior good.

Substitution Effect

The change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods.

Income Effect

The alteration in the consumption habits of a person or an economy due to a variation in actual income.

Inferior Good

A type of good for which demand decreases when income increases, and vice versa, unlike normal goods where demand increases with an increase in income.

  • Understand the relationship between price changes, income effect, substitution effect, and consumer demand.
  • Examine the characteristics of normal and inferior goods in response to income and price changes.
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rowida rosilOct 29, 2024
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