Unformatted text preview: (2) Rise in tortilla prices relative to other goods causes Mexicans to substitute away from totillas. Since tortillas are inferior, income effect is positive, but overall consumption of tortillas is still lower than before the price hike. Therefore tortillas are not Giffen. (3) This statement is therefore inconsistent with results in (2) – it describes a Giffen good in which a positive income effect dominates....
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- Fall '08
- giffen, tortillas, Prof. Rosenblat