Question

A consumer's bundle includes good X and good Y. If good X is a Giffen good and the price of good X decreases, the consumer will buy ____ of good X and ____ of good Y.

Answer 1

The consumer will buy a less of good X and More of good Y

Step-by-step explanation:

The Consumer bundle made up of both Giffen goods and regular goods will see different reactions to increase in the prices of the goods. the increase in the price of Giffen goods or an increase in the price of regular goods will make the demand for the Giffen goods increase while it will cause the demand for regular goods to decrease.

The Giffen goods are non luxury goods that defies the economic demand and supply theory. i.e the increase in price of this goods cause a relative increase in the demand for this goods by consumers.

since both goods are bundled up in a consumer's bundle the increase in the demand of the Giffen good will cause a relative decrease for the demand of good Y

Answer 2

The Giffen goods are those that have a positive slope in the relation between demand and price, which means that if the price increases, also do the demand for the product.

Then, if the price of the good X (that is a Giffen good) decreases, the consumer will buy less of the good X and more of the good Y (the fact that the one competitor, good X, has a decrease in the demand, means that the good Y may have an increase in the demand.)