Use consumer indifference curves and budget lines to illustrate the effects of an increase in income for a normal good and an inferior good (use two graphs). Be sure your diagrams are fully and correctly labeled.
What will be an ideal response?
The graphs should look like Figure 5-11 in the text for the normal good and Figure 5-12 for the inferior good. The graph for the inferior good should clearly show the consumption for one of the goods declining.
Economics
You might also like to view...
Entry of new firms into an existing market causes:
A) an upward movement along the market supply curve. B) a downward movement along the market supply curve. C) a rightward shift of the market supply curve. D) a leftward shift of the market supply curve.
Economics
Everything else held constant, if aggregate output is to the right of the IS curve, then there is an excess ________ of goods which will cause aggregate output to ________
A) supply; fall B) supply; rise C) demand; fall D) demand; rise
Economics