EBK MICROECONOMICS
EBK MICROECONOMICS
2nd Edition
ISBN: 8220103679701
Author: List
Publisher: YUZU
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Chapter 3, Problem 8Q
To determine

The allocation of scarce apartments near the city center.

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Julie buys food and other goods. She has an income of $400 per month. The price of food is initially $1.00 per unit. It then rises to $1.20 per unit. The prices of other goods do not change. To help Julie out, her mother offers to send her a check each month to supplement her income. Julie tells her mother, “Thanks, Mom. If you would send me a check for $50 per month, I would be exactly as happy paying $1.20 per unit as I would have been paying $1.00 per unit and not receiving the $50 from you.” Which of the following statements is true? Explain. The increased price of food has:a) an income effect of +$50 per monthb) an income effect of -$50 per month c) a compensating variation of +$50 per monthd) a compensating variation of -$50 per monthe) an equivalent variation of +$50 per monthf ) an equivalent variation of -$50 per month
Joseph earns $200 per week and spends his entire income on cheese which cost $5 per pound and crackers which cost $ 2 per box. Draw Josephs budget constraint. If the price of cheese increases to $8 per pound, what will happen to Josephs budget constraint?
What does a downward-sloping demand curve mean about how buyers in the market will react to a higher price?
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