On a graph, with commodity x on the horizontal axis and commodity y on the vertical axis, show...
Question:
On a graph, with commodity x on the horizontal axis and commodity y on the vertical axis, show the substitution and income effects of a decrease in the price of y. You should assume that y is an inferior good and that the substitution effect is smaller than the income effect.
Inferior good
In economics, a lower good, except normal goods whereby the opposite is identified, is good with lower demand when consumer incomes rise. Standard goods are products that increase demand as consumer income increases
Answer and Explanation: 1
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The above diagram represents the price effect, substitution effect and income effect in the lower goods price decrease y. The demand for good y...
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Normal & Inferior Goods in Microeconomics
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Chapter 3 / Lesson 7
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Discover what a normal good is, know the definition of an inferior good and see examples of normal goods and inferior goods. Read about the demand curves for inferior goods and normal goods.
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