Suppose that a consumer consumes goods x and y and has monotonic and strictly convex preferences. If the consumer aims to reach a utility level u₀with the minimum costs, his optimal consumption will be x₀*,y₀*. Now suppose that the price of x increases. In a new consumer's optimum x₁*,y₁* bringing the consumer the utility level u₀:
x₁*< x₀* if and only if the good x is a normal good.
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It must ALWAYS hold that x₁*>x₀*.
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x₁*>x₀* if and only if the good x is an inferior good.
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It must ALWAYS hold that x₁*<x₀*.
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Question

Suppose that a consumer consumes goods x and y and has monotonic and strictly convex preferences. If the consumer aims to reach a utility level u₀with the minimum costs, his optimal consumption will be x₀*,y₀*. Now suppose that the price of x increases. In a new consumer's optimum x₁*,y₁* bringing the consumer the utility level u₀:

x₁*< x₀* if and only if the good x is a normal good.

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It must ALWAYS hold that x₁*>x₀*.

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x₁*>x₀* if and only if the good x is an inferior good.

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It must ALWAYS hold that x₁*<x₀*.

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Answer

x 1 *< x 0 * if and only if the good x is a normal good.

Answer

It must ALWAYS hold that x 1 *>x 0 *.

Answer

x 1 *>x 0 * if and only if the good x is an inferior good.

Answer

It must ALWAYS hold that x 1 *<x 0 *.

Crowdly

Suppose that a consumer consumes goods x and y and has monotonic and strictly co...

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