Essay
Suppose the only two goods you consume are wine and roses.On Tuesday,the price of wine goes up and at the same time your income increases by just enough so that you are equally happy as you were on Monday.What happens to the amount of wine you consume? Are you able to afford the same bundle as you did on Monday? Use a graph of budget constraints and indifference curves to illustrate your answer.
Correct Answer:
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The result is a pure substitution effect...View Answer
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Correct Answer:
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