substitution effect: Suppose the price of sausage doubles, the substitution effect will lead her to buy the quantity of cheese 15 V times that of sausage. This means that following the substitution effect, she will buy 7.92 units of cheese and 5.28 V units of sausage. Thus, due to the substitution effect, the change in the amount of cheese is 192 units, and the change in the amount of sausage is -2.72 V units. On the other hand, following the net effect, she will consume 4.29 V units of cheese and 286 units of sausage. This means that the net change in the amount of cheese is 171 units and the net change in the amount c sausage is 514 units. Due to the income effect, the change in the amount of cheese is -363 and the change in the amount of sausage is 2.42

substitution effect: Suppose the price of sausage doubles, the substitution effect will lead her to buy the quantity of cheese 15 V times that of sausage. This means that following the substitution effect, she will buy 7.92 units of cheese and 5.28 V units of sausage. Thus, due to the substitution effect, the change in the amount of cheese is 192 units, and the change in the amount of sausage is -2.72 V units. On the other hand, following the net effect, she will consume 4.29 V units of cheese and 286 units of sausage. This means that the net change in the amount of cheese is 171 units and the net change in the amount c sausage is 514 units. Due to the income effect, the change in the amount of cheese is -363 and the change in the amount of sausage is 2.42

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 1SQP

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