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Author Question: For a normal good, does the income effect reinforce the substitution effect or does it partly offset ... (Read 79 times)

Lobcity

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on: Jun 29, 2018
For a normal good, does the income effect reinforce the substitution effect or does it partly offset the substitution effect?
 
  What will be an ideal response?

Question 2

Refer to the Article Summary. The article discusses wealth inequality, and for some people this means a more equitable distribution of wealth is needed in the economy.
 
  Would an equitable distribution of wealth necessarily be the most efficient distribution of wealth?
  A) No, it is impossible to have an economically efficient distribution which is also an equitable distribution.
  B) Yes, equitable and efficient are two different words which have the same definition.
  C) Yes, in order for the distribution to be equitable, it must also be efficient.
  D) No, an economically efficient distribution of wealth would not necessarily be equitable.


asdfghjkl;

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Reply #1 on: Jun 29, 2018
Answer to Question 1

For a normal good the substitution effect and the income effect reinforce each other, and a decrease (increase) in the price of a good will always result in an increase (decrease) in the quantity of the good demanded.

Answer to Question 2

D


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