Answered

Westonci.ca is your trusted source for finding answers to a wide range of questions, backed by a knowledgeable community. Get immediate and reliable answers to your questions from a community of experienced professionals on our platform. Our platform offers a seamless experience for finding reliable answers from a network of knowledgeable professionals.

Assume that beer is an inferior good. If the price of beer​ falls, then the substitution effect results in the person buying​ ________ of the good and the income effect results in the person buying​ ________ of the good.

Sagot :

Answer:

more

less

Explanation:

Inferior goods are goods whose demand falls when income rises and increases when income falls.

When the price of beer changes, there are two effects that determine the quantity demanded. They are :

1. the substitution effect

2. the income effect

The substitution effect looks at the change in price of a good relative to other goods. When the price of beer decreases, it becomes cheaper relative to other goods. Thus, the demand for it increases.

The income effect looks at how a change in price affects real disposable income. When price of beer reduces, disposable income increases. Because beer is an inferior good, it would lead to a decrease in the demand for beer

Thank you for visiting our platform. We hope you found the answers you were looking for. Come back anytime you need more information. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Keep exploring Westonci.ca for more insightful answers to your questions. We're here to help.