2.)Assume that the consumer depicted in the figure has an income of $20. The pri
ID: 1112897 • Letter: 2
Question
2.)Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $2. The consumer’s optimal choice is point
A.
B.
C.
D.
1.) Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the income effect associated with an increase in the price of a textbook will result in
an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles.
a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles.
a.A.
b.B.
c.C.
d.D.
Quantity of M&M;'s 10 7 6 4 2 12 3 4 5 6 7 8 9 10 Quantity of SkittlesExplanation / Answer
2) ans is B because equation of budget line is 2S+2M=20
1)ans is D.
an increase in price will decrease real income which will decrease demand of normal good and increase demand of inferior good.
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