A consumer has the following demand function for good 1: x1 = (1/4)(m/p1) The original price of the good is $2 and the consumer’s income is $200. Calculate the substitution effect, the income effect and the total effect for this consumer, when the price of good changes to $1.
A consumer has the following demand function for good 1: x1 = (1/4)(m/p1) The original price of the good is $2 and the consumer’s income is $200. Calculate the substitution effect, the income effect and the total effect for this consumer, when the price of good changes to $1.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 13SQ
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