Question 1) If a good is a Giffen
good, it must be an inferior good
A) True B) False
Question 2) If a good is an
inferior good, it must be a Giffen
good.
A) True B) False
Question 3) If the price of a good rises, then the
substitution effect of this price change
A) Reduces demand for the good if it is a normal
good but not if it is inferior.
B) Reduces demand for the good if it is a luxury but
not if it is a necessity.
C) Never increases and typically decreases demand
for this good.
D) Is positive if the goods are substitutes and
negative if they are complements.
E) Is negative if the goods are substitutes and
positive if they are complements.
Answers
Answers
• Question 1 True
• Question 2 False
• Question 3 C
The answers to all three of these questions
follow easily from the discussion in Chapter
8 of your textbook (or from today’s lecture).