Consider a graph on which one good Y is on the vertical axis and
the only other good X is on the horizontal axis. On this graph the
income-consumption curve has a negative slope for low incomes, then
it takes a zero slope for a higher income, and then it takes a
positive slope for even higher incomes (the curve looks like a
U-shape, first falling and then rising as income increases). This
curve illustrates that:
A) At low income level X is an inferior good, and at high income
level Y is a normal good.
B) At low income level Y is a normal good, and at high income level
X is an inferior good.
C) At low income level Y is an inferior good, and at high income
level both are normal good.
D) At low income level both are inferior good, and at high income
level both are normal good.
Answer d
At higher income both are inferior goods and at lower income both are normal goods.
This is because it is given that there is a negative slope for the low incomes and positive slope for the higher income.
Consider a graph on which one good Y is on the vertical axis and the only...
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