68 278
Assignments Done
99,1%
Successfully Done
In November 2018

Answer to Question #42540 in Other Economics for huqingke

Question #42540
1. A consumer splits their income equally between two goods. If the price of one good increases by 10% and their income increases by 5%, show that the consumer’s optimal consumption bundle will change despite them being able to afford their original bundle.
Expert's answer
If consumer splits their income equally between two goods, and the price of one good increases by 10% and their income
increases by 5%, consumer’s optimal consumption bundle will change from its original bundle, because after price increase first good becomes less attractive for the customer and he will buy more of second good. So, after income increase the customer will increase consumption of the second good and decrease consumption of the first good.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

Assignment Expert
30.03.18, 16:52

Dear visitor,
please use panel for submitting new questions

mary
29.03.18, 21:09

When estimating a demand function, explain why fitting a line of best fit through observed
price and quantity combinations over time is not likely to yield good estimates.

Leave a comment

Ask Your question

Submit
Privacy policy Terms and Conditions