If two goods are perfect complements, then which of the following is correctE Goods can be normal or inferior Substitution effect is positive on the good whose price goes down Total effect exceeds Income effect Substitution effect is always zero

Q: Clara's utility function is U(x, y) =(x+2)(y+1). If her marginal rate of substitution is -4 and she…

A: Marginal rate of substitution is the rate at which one good is substituted for other. It is the…

Q: Suppose two goods coffee and cream provide the consumer with utility but only if they are consumed…

A: If there is an increase in price of Coffee, then it will lead to an income effect but no…

Q: Walt has utility function u = x + y. He has an income of $240. If the price of good x changes from…

A: The given utility function is of perfect substitutes and in this type of utility function consumer…

Q: Prove that price effect = income effect + substitution effect through graphical representation

A: Price effect is the effect of the price change on the quantity demanded of a product. The price…

Q: Assume there are two goods, prices are indicated, and there is a consumer with a specified income.…

A: Price effect is the effect of the price change on the quantity demanded of a product. The price…

Q: For an individual the Marginal Rate of Substitution for good X and Y is constant and equal to 1 for…

A: The budget constraint of the individual shows the different combinations of two goods an individual…

Q: As a result of a decrease in the price of pizza rolls, consumers purchase more pizza rolls and buy…

A: The income impact expresses that when the cost of a decent reductions, maybe the purchaser of the…

Q: Suppose consumers use k units of good X and w units of good Y in fixed proportion. Then, X and Y are…

A: The goods are consumed in fixed proportions means the consumption of the good is complemented to…

Q: If a consumer has chosen optimally, their Marginal Rate of Substitution is equal to the price…

A: Marginal rate of substitution (MRS) is the rate at which an individual will be willing to substitute…

Q: Elaborate substitution effect  in case of inferior goods.

A: An individual maximizes his utility by consuming at a point where the budget constraint of the…

Q: If income consumption curve is positively sloped, one good is inferior and the other good is normal…

A: Income consumption curve is the locus of different combinations of two goods that shows consumption…

Q: A consumer has the following demand function for good 1: x1 = (1/4)(m/p1) The original price of the…

A: Individuals (consumers) directly concerned within the acquisition, use, and disposal of economic…

Q: Give an example of substitute pair and an example of complement pair that you have encountered and…

A: There are two types of related goods :-  1. Substitute goods : - those goods that can be consumed at…

Q: If the price pf pasta increases and a consumer buys more pasta, we can infer that  a. pasta is a…

A: If the price pf pasta increases and a consumer buys more pasta, we can infer that  a. pasta is a…

Q: If a person's indifference curves can be represented as a straight line, the person views the goods…

A: The Indifference curve (IC) shows the various bundles of two goods that the consumer agrees to…

Q: Coke and Pepsi are perfect substitutes. Initially the price of Coke is higher than the price of…

A: The perfect substitutes are the goods which cannot be used simultaneously and can only be used in…

Q: The substitution effect implies that as the price of a substitute good, the demand for the original…

A: Substitute goods are those goods that are consumed in place of each other. For example, Pepsi and…

Q: Avery is currently using up the entire weekly budget she has allocated to purchasing Goods X and Y.…

A: Given  Marginal utility on last unit of good X  that Avery buy by using weekly income = 14 and last…

Q: OA. illustrates two goods that are perfect substitutes. OB. illustrates two goods that are perfect…

A: The L- shaped indifference curves are for perfect complements. It implicates being used…

Q: Suppose a consumer's labor supply is negatively sloped, meaning as wage increases, the consumer…

A: An individual trades off between labor and leisure, with a given amount of work hours. The labor…

Q: Suppose a consumer has preferences between two goods that are perfect substitutes. Can you change…

A: In economics, the price of a good and the quantity consumed are inversely related. When the price…

Q: (a) Explain with the help of a diagram the Slutsky substitution effect and the income effect when…

A: Normal good: It refers to a good whose demand increases when there is an increase in the income of…

Q: When the price of good 1 decreases, the following is true (select all that applies): a) If good 1 is…

A: Goods refers to the products that meet human desires and give usefulness, such as a gratifying…

Q: derive Engel curve for a commodity measured on horizontal axis and explain graphically how price…

A: Since you have posted multiple questions, we will answer the first question for you. If you want any…

Q: Describe in your own words : Marginal Utility Diminishing Marginal Utility Income Effect…

A: To represent usefulness or benefit, the principle of utility is employed. Its use has grown…

Q: The price of goods A and B are 20 and 10 respectively. given that the marginal utility of commodity…

A: Marginal utility is the extra utility experienced with the consumption of an additional unit of a…

Q: Consider a downward-sloping demand curve. When the price of a normal good increases, the income and…

A: For normal goods, the income effect and the substitution effect both work in the same direction; a…

Q: Elaborate substitution effect and income effect in case of inferior goods graphically.

A: The indifference curve analysis helps to understand the relation between price and quantity demanded…

Q: Suppose a consumer consumes two goods, X and Y. The slope of the budget constraint equals the a.…

A: A budget constraint illustrates the various combinations of two goods that a consumer can purchase…

Q: What are the examples of complement and substitute goods, where a change in price of one good would…

A: The market demand for a commodity shifts as a result of a change in consumer income, their tasted,…

Q: Diminishing marginal rate of substitution for a good means:     I. decreasing the quantity of a…

A: Generally, marginal substitution is reducing, which means a shopper picks the substitute instead of…

Q: A KU student maximizes his sporting utility by playing Golf (G) and Tennis (T). His function is…

A: The maximum utility that a person can possibly experience given a certain price, quantity, and…

Q: For the consumer whose choices are shown in the diagram, the substitution effect of the price change…

A: Substitution effect is change in demand or consumption of  a commodity or a service due to a change…

Q: Explain diagramatically and theoretically the working of price effect, income effect and…

A: The income effect - The income effect considers the change in real income or purchasing power due to…

Q: Assume the price of good A goes up and the consumer decreases purchases of good A and decreases…

A: Luxury goods refer to the types of goods whose demand rises more than proportionally income rises so…

Q: Kimberly has $1,000 per year to spend between $50 concert tickets and $200 per night getaways. Her…

A: The answer is - The degree to which concerts and overnight getaways are normal goods or inferior…

Q: Gabby has the utility function U(X,Y) = X0.y0.26 When Gabby consumes X= 5 and Y=8 she has a marginal…

A: MRS = (MUx)/(MUy) MUx = dU/dx = Y0.25.0.5X(0.5-1) = 0.5Y0.25X(-0.5) MUy = dU/dy =…

Q: A consumer consumption bundle contains good X and Y. Suppose the price of good X goes up and a…

A: Introduction: Consumption is the usage of products and services by households in economics.…

Q: Elaborate substitution effect and income effect in case of inferior goods.

A: A consumer maximizes his utility by consuming at a point where the indifference curve of the…

Q: Which of the following statements is correct? Multiple Choice   Marginal utility is the…

A: The measure that in turn depicts the total satisfaction that is being received from the consumption…

Q: Suppose a consumer spends all of their money on good X and good Z. When the price of good Z…

A: In a market, change in price of a good have two types of effect that are substitution and income…

Q: 1.6) The marginal rate of substitution (MRS) can be defined as: Select one or more: a. The amount…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Make a curve of the budget line curve with the Indifference curve, make a separation between the…

A: In economics, and in particular in consumer choice theory, the substitution effect is one aspect of…

Q: The substitution effect. Multiple Choice is generally so weak that its effect cannot be predicted.…

A: The price effect includes income effect and substitution effect. It is the summation of two effects…

Q: The change in consumption of a good that occurs when its price falls is the result of Select one:…

A: Income effect refers to the change in the quantity of good due to change in the price of that good,…