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Question 3) If the price of a good rises, then the substitution effect of this price change

Question 1 ) If a good is a Giffen good, it must be an inferior good A) True B) False Question 2) If a good is an inferior good, it must be a Giffen good. A) True B) False. Question 3) If the price of a good rises, then the substitution effect of this price change

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Question 3) If the price of a good rises, then the substitution effect of this price change

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  1. Question 1) If a good is a Giffen good, it must be an inferior goodA) True B) FalseQuestion 2) If a good is an inferior good, it must be a Giffen good.A) True B) False

  2. Question 3) If the price of a good rises, then the substitution effect of this price change • Reduces demand for the good if it is a normal good but not if it is inferior. • Reduces demand for the good if it is a luxury but not if it is a necessity. • Never increases and typically decreases demand for this good. • Is positive if the goods are substitutes and negative if they are complements. • Is negative if the goods are substitutes and positive if they are complements.

  3. Answers

  4. Answers • Question 1 True • Question 2 False • Question 3 C The answers to all three of these questions follow easily from the discussion in Chapter 8 of your textbook (or from today’s lecture).

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