Consider a graph on which one good Y is on the vertical axis and the only other good X is on the horizontal axis.
On this graph the income-consumption curve has a positive slope for low incomes, then it takes a zero slope for a higher income, and then it takes a negative slope for even higher incomes (the curve looks like an arc, first rising and then falling as income increases). This curve illustrates that, for all income levels, A) both X and Y are normal.
B) only Y is normal.
C) both X and Y are inferior.
D) only X is normal.
Question 2
Suppose the supply of textbooks is upward sloping and shifts leftward due to higher ink and paper costs. Which of the following events would leave the equilibrium price of textbooks at the same level observed before the supply shift?
A) Demand is perfectly elastic (horizontal).
B) Demand is downward sloping and shifts leftward.
C) all of the above
D) none of the above
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