Consumer chooses between christmas trees-christmas lights

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Reference no: EM131388921

Which of the following statements is true if the consumer chooses between Christmas trees and Christmas lights:

a. If the price of Christmas trees goes up and the income effect is greater than the substitution effect (in absolute value), then Christmas trees have to be Giffen goods.

b. If the income effect and the substitution effect have the same value (in absolute value) and Christmas trees are a normal good, then the demand for Christmas trees is perfectly elastic.

c. If the income effect and substitution effect have the same value (in absolute value)and Christmas trees are inferior goods, then the demand for Christmas trees is perfectly inelastic.

d. If the utility function of Christmas trees and Christmas trees is Cobb-Douglas, then the cross price elasticity of the compensated demand is always smaller than the cross price elasticity of the uncompensated demand (in absolute value).

Reference no: EM131388921

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