According to the Permanent Income Hypothesis (PIH), what should a consumer do if she receives news that she will be demoted next year (and her salary will be halved)? Draw the paths of income and consumption for this consumer.
According to the Permanent Income Hypothesis (PIH), what should a consumer do if she receives news that she will be demoted next year (and her salary will be halved)? Draw the paths of income and consumption for this consumer.
Chapter5: Income And Substitution Effects
Section: Chapter Questions
Problem 5.6P
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According to the Permanent Income Hypothesis (PIH), what should a consumer do if she receives news that she will be demoted next year (and her salary will be halved)? Draw the paths of income and consumption for this consumer.
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