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Jerry consumes two goods: tomatoes and barley. Barley is a Giffen good for him. Now suppose the market price of barley decreases. a) How would
Jerry consumes two goods: tomatoes and barley. Barley is a Giffen good for him. Now suppose the market price of barley decreases.
a) How would that affect the best feasible bundle of tomatoes and barley? Illustrate with a graph and explain briefly.
b) Illustrate the substitution and income effects with a graph. Explain the figure.
c) Is barley an inferior or a normal good? Explain with the help of the figure you drew for part b).
d) Can a Giffen good ever be a normal good? Why or why not?
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