In general, the income effect is smaller than the offsetting substitution effect for _____ good.
A) an inferior
B) a substitute
C) a normal
D) a Giffen

Question

Quizplus · Accepted Answer

An inferior good is a good for which demand decreases as income increases. The income effect for an inferior good is negative, while the substitution effect is positive. The substitution effect is larger than the income effect, so the overall effect of a price increase on the demand for an inferior good is a decrease in demand.

In General, the Income Effect Is Smaller Than the Offsetting