Impact of increase in price

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Reference no: EM1315902

1. Assume x and y are the only two goods a person consumes. If after a rise in p_x, the quantity demanded of y decreases, one could say

a. the income effect dominates the substitution effect
b. the substitution effect dominates the income effect
c. it is still impossible to0 determine whether the substitution or income effect dominates
d. none of the above

2. With only two goods, x and y, if x and y are gross substitutes, a rise in p_x must necessarily

a. increase spending in x.
b. reduce spending in y,
c. increase spending in Y
d. reduce spending in Y

Reference no: EM1315902

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