Question

If increasing a consumer's income causes consumption of good x to decrease, and consumption of good y to increase, then it can be concluded that good x and good y are substitutes.

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Sigrid

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106 Answers

1. If an increase in consumer's income causes consumption of good x to decrease, then:

\text{good x is an inferior good}

2. If an increase in consumer's income causes consumption of good y to increase, then:

\text{good y is a normal good}

3. Substitutes are defined such that an increase in the price of one good leads to an increase in the consumption of the other, not by change in income.

\text{Thus, good x and good y are not substitutes.}

\text{No, good x and good y are not substitutes}

2. If an increase in consumer's income causes consumption of good y to increase, then:

3. Substitutes are defined such that an increase in the price of one good leads to an increase in the consumption of the other, not by change in income.

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