Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good Y decreases. Then, which of the following effects is known with certainty?
A. The income and substitution effects reinforce one another, leading to an overall increase in the consumption of good X.
B. The income and substitution effects will reinforce one another, leading to an overall increase in the consumption of good Y.
C. The income and substitution effects reinforce one another, leading to an overall decrease in the consumption of good X.
D. The income and substitution effects will have competing effects, leading to an indeterminate impact on the consumption of good X.
Answer: B
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In the above figure, if the real wage is $20 per hour, a labor
A) shortage will occur and the real wage will rise. B) shortage will occur and the real wage will fall. C) surplus will occur and the real wage will rise. D) surplus will occur and the real wage will fall.
In 2012, all of fast-food chains expanded their hours of operation, with nearly 40% of all McDonald's restaurants being open 24 hours per day. This strategy was aimed at increasing sales because:
A) it was estimated that nearly one-fifth of all employed Americans worked primarily in the evening contributing to the demand for fast-food in late hours. B) it was estimated that consumers who shop at night tend to be more price sensitive. C) it was believed that longer hours of operation would lead to greater brand loyalty. D) none of the above.