After Joyce and Larry purchased their first house, they made additional home improvements in response to increases in income. After a while, their income rose so much that they could afford a larger home. Once they realized they would be moving, they reduced the amount of home improvements. Their Engel curve for home improvements on their current home is
A) negatively sloped.
B) flat.
C) positively sloped.
D) backward bending.
Question 2
When deriving an Engel curve, the prices of both goods
A) are held constant.
B) increase by the same percentage as income.
C) decrease by the same percentage as income.
D) can either decrease, increase or stay the same.
