The total effect of a price change on the amount of a good that a consumer demands can be broken down into two parts: the income effect and the substitution effect. Consider an increase in the price of the good and assume that the good in question is not a perfect substitute or a perfect complement relative to another good. 1st attempt See Hint If the good is normal, then (1) the substitution effect is the demand curve is , (2) the income effect is C , and (3) the slope of If, however, the good is inferior (but not a Giffen good), then (4) the substitution effect is , ,and (6) the slope of the demand curve is D ,(5) the income effect is Finally, if the good is a Giffen good then (7) the substitution effect is (9) the slope of the demand curve is ,(8) the income effect is , and (9) the slope of the demand curve is .

1. negative, 2. negative, 3. negative, 4. negative, 5. positive, 6. negative, 7. negative, 8. positive, 9. positive

Explanation:

In the context, if the given good is normal, then substitution effect effect will be negative as the quantity demanded will decrease with the price for the normal goods. Income effect also becomes negative as the increase in the income will also increase he quantity that is demanded in the case of the normal good. And the demand curve slope will become negative as the substitution effect will overpower the income effect.

However, the substitution effect will be negative when the goods are inferior and the net income will be positive, but the demand curve slope will become negative as the positive income effect is not as large as to outweigh substitution effect.

When the good is Giffen good, the substitution effect will become negative and the income effect becomes positive and the demand curve slope becomes positive.