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Homework answers / question archive / With inferior goods (like ramen noodles), the income effect works in the opposite direction from the income effect discussed in the text
With inferior goods (like ramen noodles), the income effect works in the opposite direction from the income effect discussed in the text. If a consumer feels richer, she would buy less of an inferior good. If she feels poorer, she would buy more.
What if you knew for sure that the substitution effect dominated the income effect? What would happen to the consumer?s optimal choices for potatoes and meat?
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