Question 1) If a good is a Giffen good, it must be an inferior good A) True B) False Question 2) If a good is an inferior good, it must be a Giffen good. A) True B) False

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Question 1) If a good is a Giffen good, it must
be an inferior goodA) True B)
FalseQuestion 2) If a good is an inferior good,
it must be a Giffen good.A) True B) False
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• Question 3) If the price of a good rises, then
  the substitution effect of this price change
• Reduces demand for the good if it is a normal
  good but not if it is inferior.
• Reduces demand for the good if it is a luxury but
  not if it is a necessity.
• Never increases and typically decreases demand
  for this good.
• Is positive if the goods are substitutes and
  negative if they are complements.
• Is negative if the goods are substitutes and
  positive if they are complements.

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Answers
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Answers

• Question 1 True
• Question 2 False
• Question 3 C
• The answers to all three of these questions
  follow easily from the discussion in Chapter 8 of
  your textbook (or from todays lecture).