Question

If a good is an inferior good, when its price increase, the income effect is __________...

If a good is an inferior good, when its price increase, the income effect is __________ (positive/negative), substitution effect is ____________(positive/negative) and total effect is ________(positive/negative).

If a good is Giffen good, when its price increase, the income effect is __________ (positive/negative), substitution effect is ____________(positive/negative) and total effect is ________(positive/negative).

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Answer #1

If a good is an inferior good, when its price increase, the income effect is ____positive______ , substitution effect is ____negative________ and total effect is ____negative____.

If a good is Giffen good, when its price increase, the income effect is ____positive______ , substitution effect is _____negative_______ and total effect is __positive______.

(SE is always negative and IE is positive for both giffen and inferior goods. But total effect is negative for inferior goods and positive for giffen goods.)

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