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Unformatted text preview: Q3. John spent a given budget of amount I on two goods, x and y. When the price of x was reduced, John decided to spend more money on y in spite of the fact that both the price of y and the budget had not changed. Discuss each of the statements below and identify whether the statement is true, false, or uncertain. a. The expenditure on x increases. b. The consumption of x may increase. c. Y is a normal good. d. John consumed more y in spite of the fact that the relative price of y is higher. e. If consumption of x increases (in quantity terms), then x is a normal good....
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- Fall '07