A consumer has two goods in his consumption bundle: bread and coffee. The current price of bread is $3.00 per loaf and the price of coffee is $6.00 per cup. (enter your response round to one or two decimal places as appropriate). What is the relative price of bread to coffee? (bread per unit of coffee)? Suppose that the price of bread increases by 10% and the price of coffee increases by 20% The relative price (bread per unit of coffee) has Based on the substitution effect, we would expect our consumer to buy relatively more bread, relatively more coffee or make no change to this consumption bundle?

A consumer has two goods in his consumption bundle: bread and coffee. The current price of bread is $3.00 per loaf and the price of coffee is $6.00 per cup. (enter your response round to one or two decimal places as appropriate). What is the relative price of bread to coffee? (bread per unit of coffee)? Suppose that the price of bread increases by 10% and the price of coffee increases by 20% The relative price (bread per unit of coffee) has Based on the substitution effect, we would expect our consumer to buy relatively more bread, relatively more coffee or make no change to this consumption bundle?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 19SQ

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Consider a consumer who wants to consume only two commodities and has an income of $250. Assume the price of good 1 is $25 per unit and the price of good 2 is $50 per unit. Now, inflation causes the price of good 1 to increase to $30 per unit, while the price of good 2 increases to $60 per unit. On the other hand, the consumer also gets a raise of $110 (so her new income is $360). What will happen to the consumption bundles (x₁, x₂)?