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An increase in the price of a Giffen good makes the people who consume that good better of

An increase in the price of a Giffen good makes the people who consume that good better off.

12.Jessica’s preferences for peanut butter and jelly are represented by the utility function U(pj) ? min?2p, 5j?. If prices and income change, but her old consumption bundle lies somewhere on her new budget line, she will not change her consumption.

13.Jimmy’s utility function is U(ab) ? ab, where a is his consumption of apples and b is his consumption of bananas. If prices and income change in such a way that Jimmy’s old consumption lies on his new budget line, then Jimmy will not change his consumption bundle.

14.Suppose a consumer has strictly convex preferences and her Engel curve for a good is a vertical line for some range of income. In that same income range, her demand curve for the good slopes down.

15.John purchases two goods, x and y. Good x is an inferior good for some range of income. There must be another range of income for which good x is a normal good.

16.A consumer has the utility function U(xy) ? x ? 2y1/2. The price of good x is 2 and the price of good y is 1. The consumer’s income is 20. If the price of good y rises to 2, then entire change in demand for y is due to the substitution effect.

17.The Hicks version of the substitution effect of a price change measures the change in a consumer’s demand if the consumer’s income were changed just enough so the consumer would remain on the same indifference curve as before the price change.

Dec 13 2019 View more View Less

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