5. Income Effect & Substitution Effect (20%)- (still use budget line with energy drink on the x-axis, and popcorn on the y-axis). If Annie's hourly income remains $160. The price of energy drink is on sale and drops to $2 a six-pack of can energy drink, while the price of popcorn remains at $5 a bag. a. Draw the new budget line(s) (with energy drink on the x-axis, and popcorn on the y-axis) (5%) b. Use indifference curve to identify the change in quantity purchased (5%) c. and illustrate the income effects (points and distance) (10%) and substitution effects (points & distance) (5%)
5. Income Effect & Substitution Effect (20%)- (still use budget line with energy drink on the x-axis, and popcorn on the y-axis). If Annie's hourly income remains $160. The price of energy drink is on sale and drops to $2 a six-pack of can energy drink, while the price of popcorn remains at $5 a bag. a. Draw the new budget line(s) (with energy drink on the x-axis, and popcorn on the y-axis) (5%) b. Use indifference curve to identify the change in quantity purchased (5%) c. and illustrate the income effects (points and distance) (10%) and substitution effects (points & distance) (5%)
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 3SQP
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I have completed question 4 but need help with question 5. Data needed to answer 5 in included in question 4
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