Tony consumes two goods. Suppose that his income decreases from $2000 to $1000 and at the same time, the price of good 1 decreases from $10 to $5 while the price of good 2 stays constant. Then, Tony’s demand for a good 2 (I recommend drawing how the budget constraint changes)

Question

Tony consumes two goods. Suppose that his income decreases from $2000 to $1000 and at the same time, the price of good 1 decreases from $10 to $5  while the price of good 2 stays constant. Then, Tony’s demand for a good  2 (I recommend drawing how the budget constraint changes)

Answer

will decrease only if it is a Giffen good for him.

Answer

will increase only if it is a Giffen good for him.

Answer

will increase only if it is an ordinary good for him.

Answer

will increase only if it is a normal good for him.

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Tony consumes two goods. Suppose that his income decreases from $2000 to $1000 a...

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