Problem
1. Define the income effect. What variables do we hold constant in order to isolate the income effect?
2. What are the differences between normal goods, inferior goods, and luxury goods?
3. Both the income expansion path and the Engel curve show the effect of income on consumption choices. When might you choose to use the income expansion path? When might the Engel curve be more useful?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.