If the price of a product increases and the income effect outweighs the substitution effect:
one of the goods must be inferior
both goods must be normal
the two goods must be substitutes
the two goods must be complements
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Adam buys 4 games a month for his PlayStation game console and 25 packs of kraft dinner a month. The prices of both goods drop by 40%. Assume that kraft dinner is an inferior good and play station games are ordinary goods. Show the income and substitution effects for both goods on a graph.
KD ________
VG ________