Answer Happy

2. Which of the following statements is true for an inferior, but non-Giffen good? (3 marks) (a) Following a rise in the price of the good, there will be an increase in the quantity demanded due to the substitution effect; a decrease in the quantity demanded due to the income effect; the substitution effect will outweigh the income effect. (b) Following a rise in the price of the good, there will be a decrease in the quantity demanded due to both the substitution and income effect and the two effects will therefore reinforce each other. (c) Following a rise in the price of the good, there will be a decrease in the quantity demanded due to the substitution effect; an increase in the quantity demanded due to the income effect; the substitution effect will outweigh the income effect. (d) Following a rise in the price of the good, there will be a decrease in the quantity demanded due to the substitution effect; an increase in the quantity demanded due to the income effect; the income effect will outweigh the substitution effect. a