healthier food (a normal good). Suppose the price of a frozen dinner i Esteban r
ID: 1123248 • Letter: H
Question
healthier food (a normal good). Suppose the price of a frozen dinner i Esteban receives some utility from consuming a frozen dinner (an inferior good), but would much rather purchase (a normal good). Suppose the price of a frozen dinner increases and that the quantity that Esteban e that a frozen dinner is not a giffen good. substitution effect Which effect causes Esteban's quantity demanded of a frozen dinner to decrease? income effect Which effect causes Esteban's quantity demanded of a frozen dinner to increase?Explanation / Answer
The frozen dinner is an inferior good whose demand decreases with an increase in income.
Increase in price of dinner leads to decrease in purchasing power and hence demand curve pivots to left.
Quantity demanded will decrease due to income effect.
Quantity demanded will increase due to substituition effect.
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