1.There are two goods F and C. Let MU and P denote marginal utility and price of each good. SupposeMUF = 2,MUC = 1,PF = 1,PC = 2.Are you maximizing your satisfaction? If not, what would you do to increase your satisfaction? Explain. 2.What is the substitution effect? Can it cause the quantity to decrease given a decrease in price? Explain 3.What is the income effect? Can it cause the quantity to decrease given a decrease in price? Explain
1.There are two goods F and C. Let MU and P denote marginal utility and price of each good. SupposeMUF = 2,MUC = 1,PF = 1,PC = 2.Are you maximizing your satisfaction? If not, what would you do to increase your satisfaction? Explain. 2.What is the substitution effect? Can it cause the quantity to decrease given a decrease in price? Explain 3.What is the income effect? Can it cause the quantity to decrease given a decrease in price? Explain
Chapter21: Demand: Consumer Choic
Section: Chapter Questions
Problem 8E
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1.There are two goods F and C. Let MU and P denote
MUF = 2,MUC = 1,PF = 1,PC = 2.
Are you maximizing your satisfaction? If not, what would you do to increase your satisfaction? Explain.
2.What is the substitution effect? Can it cause the quantity to decrease given a decrease in price? Explain
3.What is the income effect? Can it cause the quantity to decrease given a decrease in price? Explain
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