The price of peaches goes up and I observe you buying more strawberries. This implies strawberries must be a normal good.

Answer the following statement true (T) or false (F)


False

Rationale:

When the price of peaches goes up, the substitution effect (from A to B) clearly suggests the purchase of more strawberries. But the optimal final bundle could be bundle C, which would make strawberries an inferior good.

Economics

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