Charlie's utility function is U = xAxB. The price of apples used to be $1 per unit, and the price of bananas $2 per unit. His income was $40 per day. If the price of apples increased to $2.25 and the price of bananas fell to $1.75. Then in order to be able to just afford his old bundle, Charlie would have to have a daily income of
a. $62.50. b. $126. c. $31.25. d. $93.75. e. $250.
Goods 1 and 2 are perfect complements, and a consumer always consumes them in the ratio of 2 units of good 2 per unit of good 1. If a consumer has an income of $300 and if the price of good 2 changes from $5 to $6, while the price of good 1 stays at $1, then the income effect of the price change
a. is exactly twice as strong as the substitution effect. b. accounts for the entire change in demand.
c. does not change demand for good 1.
d. is 6 times as strong as the substitution effect.
e. is 5 times as strong as the substitution effect.
Suppose every Buick owner
Charlie's utility function is U = xAxB. The price of apples used to be $1 per unit, and the price of bananas $2 per unit. His income was $40 per day. If the price of apples increased to $2.25 and the price of bananas fell to $1.75. Then in order to be able to just afford his old bundle, Charlie would have to have a daily income of
a. $62.50. b. $126. c. $31.25. d. $93.75. e. $250.
Goods 1 and 2 are perfect complements, and a consumer always consumes them in the ratio of 2 units of good 2 per unit of good 1. If a consumer has an income of $300 and if the price of good 2 changes from $5 to $6, while the price of good 1 stays at $1, then the income effect of the price change
a. is exactly twice as strong as the substitution effect. b. accounts for the entire change in demand.
c. does not change demand for good 1.
d. is 6 times as strong as the substitution effect.
e. is 5 times as strong as the substitution effect.
Suppose every Buick owner
