HomeSolution LibraryEconomicsMicroeconomics › Solution ID 5983

This solution has not been downloaded by you.

Download now to rate and review the solution!

Income and substitution effect for normal good, giffen good and inferior good.

Views (1854)

Rick purchases two goods, food and clothing. He has a diminishing marginal rate of substitution of food for clothing. Let x denote the amount of food consumed and y the amount of clothing. Suppose the price of food increases from Px1to Px2. On a clearly labeled graph, illustrate the income and substitution effects of the price change on the consumption of food. Do so for each of the following goods

(a) Food is a normal good

(b) The income elasticity of demand for food is zero

(c) Food is an inferior good, but not a Giffen good

(d) Food is a Giffen good

Reviews & Ratings

You can help other students Rate this Solution!
Be the first to review this solution!
$ 3.99 Original Price: $ 6.99 Solution document is in Pdf format

Buy Now
Classof1.com is a safe, secure and trusted website as certified by Norton Secure (powered by VeriSign)
About Us | Terms of Use | Privacy Policy Copyright © 2002-2014 Classof1. All rights reserved.
Get live-chat assistance at Classof1.com
Get live-chat assistance at Classof1.com