If the Consumer Purchases Only Two Goods,X and Y,and If

question 114

True/False

If the consumer purchases only two goods,X and Y,and if (MU_x / P_x) = (MU_y / P_y) then the consumer cannot reallocate her expenditures on X and Y to increase her utility,unless she has more money to spend.

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Definitions:

Normal Goods

Goods for which demand increases as consumer income rises, and decreases as consumer income falls.

Income Elasticity

A measure of how the demand for a good or service changes in response to changes in consumers' income.

Inferior Good

A type of good for which demand decreases when the income of the consumer increases, inversely related to consumer income.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, in contrast to a normal good.