A consumer must spend all of her income on two goods (x and Y). In each of the f

Question

A consumer must spend all of her income on two goods (x and Y). In each of the following scenarios, indicate whether the equilibrium consumption of goods X and Y will increase or decrease. Assume good X is a normal good and good Y is an inferior good. a. Income doubles. Consumption of good X will increase and consumption of good Y will increase. Consumption of good x will increase and consumption of good Y will decrease. Nothing will happen to the consumption of either good. Consumption of good X will decrease and consumption of good Y will increase. b. Income quadruples and all prices double. Consumption of good X will decrease and consumption of good Y will decrease. Consumption of good X will decrease and consumption of good Y will increase. Nothing will happen to the consumption of either good. Consumption of good X will increase and consumption of good Y will decrease. c. Income and all prices quadruple. Consumption of good X will increase and consumption of good Y will increase. Nothing will happen to the consumption of either good. Consumption of good X will increase and consumption of good Y will decrease. Consumption of good X will decrease and consumption of good Y will increase. d. Income is halved and all prices double. Consumption of good X will decrease and consumption of good Y will increase. Nothing will happen to the consumption of either good. Consumption of good x will increase and consumption of good Y will decrease. Consumption of good X will decrease and consumption of good Y will decrease.

Explanation / Answer

a)consumption of x will increase and consumption of y will decrease

b)consumption of good x will increase and y will decrease

c) x will increase and y will decrease

d)x will decrease and y will increase

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