Defend or refute the following statements:
a. "If the income and substitution effects of a rise in the price of a good both cause consumption of the good to fall, the good is inferior"
b. "A peasant farmer allocates his entire budget to two goods; rice and beans. If rice is an inferior good."
c. "Increases in interest rates increase the utility of net savers, but decrease the utility of net borrowers.
Both persons A and B, have identical preferences, and identical wage rates. A has no non-labor income, but B receives a non-labor income (from her husband's pension). Assuming that leisure is a normal good, who will work more hours??
Thanks so much!!