Answered: GOOD Y U <+ ☑ с BC B GOOD X BC2 CB If…

GOOD Y U <+ ☑ с BC B GOOD X BC2 CB If point C represents the new best bundle, what kind of good is good X? Inferior good, but not a Giffen good Giffen good Normal good

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 13PA

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Question

Suppose that BC1 on the following graph represents your initial budget constraint for good X and good Y, and point A represents the best bundle, given this choice set. After a change in the price of good X, your new budget constraint is now BC2. The compensated budget is parallel to BC2, representing the same tradeoff between good X and good Y, and it is tangent to the given indifference curve (U) at point B.

GOOD Y
U
<+
☑
с
BC
B
GOOD X
BC2
CB
If point C represents the new best bundle, what kind of good is good X?
Inferior good, but not a Giffen good
Giffen good
Normal good

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