- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 8. Topics in Demand and Supply Analysis
- Subject 3. Substitution Effect, Income Effect, Normal and Inferior Goods
CFA Practice Question
Median household income is $50,000 per year. The typical household spends about $125 per year on milk, which has an income elasticity of about 0.07. From this information, we can conclude that ______
B. there is no substitution effect for milk.
C. the income effect from a change in the price of milk is very small.
A. milk is a Giffen good.
B. there is no substitution effect for milk.
C. the income effect from a change in the price of milk is very small.
Correct Answer: C
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