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Unformatted text preview: part corresponds to the substitution effect. Y 1 " Y 2 = Substitution Effect ( # Y) Y 2 " Y 3 = Income Effect ( ! Y) Y 1 " Y 3 = Total Effect ( # Y) c) Is Y an inferior good? ____Yes___ Why? As real income # ’ed consumers purchased less Y. c) Is Z a substitute good? _____Yes__ Why? As P y ! ’ed consumers purchased less Z. Good Z Good Y $ A P Y ! ’s $ B $ C Substitution Effect Income Effect Total Effect Substitution Effect Total Effect Income Effect Z 3 Z 2 Z 1 Y 3 Y 2 Y 1 B 2 B 1 I 2 I 1...
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- Fall '09
- Utility, #, py