Question

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
3.?


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! :-)