Answered: b) Suppose that the price of jeans…

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 3SQP

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Question

Elizabeth makes $200 a week at het summer job and spends her entire weekly income on new
running shoes and jeans, since these are only two items that provide utility to her. Furthermore,
Elizabeth insists that for every pair of jeans she buys, she must also buy a pair of shoes.
(without the shoes, the new jeans are worthless). Therefore, she buys the same number of pairs
of shoes and jeans in any given week.
a) If jeans cost $20 and shoes cost $20 , how many will Elizabeth buy of each?
b) Suppose that the price of jeans rises to $30a pair , how many shoes and jeans will she
buy?
c) To what effect (income or substitution) do you attribute the change in utility levels between part a and part b

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