I have three True/False questions. If they are false, please explain why. It is due Monday.
1. A shift in supply causes the price of a good to rise. The shift must have been an increase in supply.
I think this is True.
2. The price of good X rises. This causes an increase in the price of good Y. Goods A and B are substitutes.
I think this is False, because there is not enough information about Good A and B.
3. Two inferior goods can be complements to each other.
I think this is true.
1. If there is a surplus (increase in supply) the price drops.
2. I think you are correct
1) answered by Lance
2) If X and Y are substitutes, then when the price of X rises, people by less X and more Y (i.e., demand for Y rises). Price of Y goes up. So, I believe #2 is true.
3) Inferior goods are things you buy less of as income rises. Complements are two goods typically purchased together. Two inferior goods can be complements. So, I believe 3 is true.
The thing throwing me off on #3 is that our instructor had mentioned both goods could not be inferior?
Thanks to both of you! :-)
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