Robinson makes $200 a week and spends his entire income on running shoes and basketball shorts. a. Write down the algebraic expression for his budget constraint if running shoes and basketball shortscost $20 each. How many of each good will he buy? b. Write down the algebraic expression for Mr. Robison’s budget constraint if the price of basketball shorts rises to $30 each. How many of each good will he buy? c. Illustrate the results in parts (a) and (b) and provide a decomposition
Robinson makes $200 a week and spends his entire income on running shoes and basketball shorts. a. Write down the algebraic expression for his budget constraint if running shoes and basketball shortscost $20 each. How many of each good will he buy? b. Write down the algebraic expression for Mr. Robison’s budget constraint if the price of basketball shorts rises to $30 each. How many of each good will he buy? c. Illustrate the results in parts (a) and (b) and provide a decomposition
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 20SQ
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Robinson makes $200 a week and spends his entire income on running shoes and basketball shorts.
a. Write down the algebraic expression for his budget constraint if running shoes and basketball shortscost $20 each. How many of each good will he buy?
b. Write down the algebraic expression for Mr. Robison’s budget constraint if the price of basketball shorts rises to $30 each. How many of each good will he buy?
c. Illustrate the results in parts (a) and (b) and provide a decomposition of the income and substitution effect.
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