8 Consider the figure below Books 10 4 2 3 4 5 6 7 89 10 Pai

8. Consider the figure below: Books 10 4 2 3 4 5 6 7 89 10 Paintings What is the name of the curve connecting points A, B, C and D? a. b. According to the figure, are books a normal good or an inferior good? c. According the figure, are paintings a normal good or an inferior good?

Solution

a. Ans : The name of curve connecting point A, B , C and D is called income expansion path.

b. Ans : according to the figure , books are inferior goods .

c. Ans : according to the figure , paintings are normal goods .

Explanation:

Income expansion path shows optimum combination of two goods at different level of income.

A positive slope of income expansion path shows that the good is a norma good where as a negative slope of income expansion path shows that the good is a inferior good.