Clothing (units per month) Food (units per month) Starting from point A, after the price of food decreases, the quantity of food purchased: O increases, due to the income effect but decreases due to the substitution effect O decreases O increases from A to B due to the income effect and then to C due to the substitution effect O increases due to the substitution effect but decreases due to the income effect

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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6. Part a and Part B

Clothing
(units per
month)
Food
(units per
month)
Starting from point A, after the price of food decreases, the quantity of food purchased:
increases, due to the income effect but decreases due to the substitution effect
decreases
increases from A to B due to the income effect and then to C due to the substitution effect
O increases due to the substitution effect but decreases due to the income effect
Transcribed Image Text:Clothing (units per month) Food (units per month) Starting from point A, after the price of food decreases, the quantity of food purchased: increases, due to the income effect but decreases due to the substitution effect decreases increases from A to B due to the income effect and then to C due to the substitution effect O increases due to the substitution effect but decreases due to the income effect
The effect of a decrease in the price of food, as depicted in the figure above, leads us to
believe that:
both food and clothing are normal goods
O food is an inferior good and clothing is a normal good
O both food and clothing are inferior goods
O food is a normal good and clothing is an inferior good
Transcribed Image Text:The effect of a decrease in the price of food, as depicted in the figure above, leads us to believe that: both food and clothing are normal goods O food is an inferior good and clothing is a normal good O both food and clothing are inferior goods O food is a normal good and clothing is an inferior good
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