Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 21 - Part VII - The Theory of Consumer Choice - Quick Check Multiple Choice - Page 458: 5

Answer

c) pasta is an inferior good, and the income effect is greater than the substitution effect.

Work Step by Step

With the price increasing for a good (and the quantity purchased increasing), we have a Giffen good. A Giffen good is an inferior good. Under the income effect, our purchasing power has decreased. Under the substitution effect, we are getting fewer pieces of pasta for every other good we give up.
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