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QUESTION

I am quite confused with the following questions. The answers are D B A. For a), I think A is an inferior good, but the answer says B is a normal...

b)A demand curve for a normal good is downward sloping due to A) the income effect.

B) the combination of income and substitution effects in the same direction. C) the Giffen effect.

D) the substitution effect.

E) neither the substitution effect nor the income effect.

c) Suppose the price of potatoes falls and we observe a decrease in an individualʹs purchases of potatoes. Which of the following can we infer?

A) The income effect is negative and outweighs the substitution effect. B) The income effect is positive and exceeds the substitution effect.

C) The income effect just offsets the substitution effect.

D) The income effect is negative and reinforces the substitution effect.

E) The substitution effect outweighs the income effect. 

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