EC1, Section 2

However, if the good is a normal good, the second term is negative, since both Y>0 and ((X/(I)>0. Thus the net effect is ambiguous. The effects of an increase in PY are positive or negative depending on whether or not the substitution effect dominates the income effect. Example 6.1. Consider again the Cobb-Douglas function. U(X,Y) = X.5Y.5 ................
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