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Imagine that you have a choice between consuming good x or y, and that the price of x increases. Since good x is now more
Imagine that you have a choice between consuming good x or y, and that the price of x increases. Since good x is now more expensive, we know that your purchasing power will decrease. We also know that the substitution effect will see you shift consumption out of good x and into good y. Is it possible that the income effect has you consuming more of both good x and y as a result of this price change? Why or why not?
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