New utility-maximizing point

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Suppose a consumer shows convex-shaped preferences, and gets utility from consuming goods X and Y. Now, assume the price of good Y, Py, goes down. From class, you know that, when prices change, the movement to a new utility-maximizing point may be broken down into substitution and income effects. Without appealing to graphs and math, explain, in your own words, () the intuition behind this income effect, and (ii) under what conditions you can determine whether good Y is a normal or inferior good.

Reference no: EM133077617

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