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2. Assume Juanita's budget constraint is originally BC, with the price of good Y being $2. Then her budget constraint changes to BC. (Each box is 2 units) Quantity of Good Y 20 18 16 14 12 10 8 6 4 2 0 BC BC 0 2 4 6 8 10 12 14 16 18 20 Quantity of Good X a. What changed for the budget constraint to move from BC, to BC,? Be as specific as possible. (It is possible to provide what changes, in what direction and a dollar value.) b. Are goods X and Y complements or substitutes? Explain. c. Calculate the ARC cross-price elasticity of demand for good X with respect to good Y. d. Would this change in budget constraint result in a movement along or shift in the demand curve for good X? Explain. d. Would this change in budget constraint result in a movement along or shift in the demand curve for good Y? Explain

2. Assume Juanita's budget constraint is originally BC, with the price of good Y being $2. Then her budget constraint changes to BC. (Each box is 2 units) Quantity of Good Y 20 18 16 14 12 10 8 6 4 2 0 BC BC 0 2 4 6 8 10 12 14 16 18 20 Quantity of Good X a. What changed for the budget constraint to move from BC, to BC,? Be as specific as possible. (It is possible to provide what changes, in what direction and a dollar value.) b. Are goods X and Y complements or substitutes? Explain. c. Calculate the ARC cross-price elasticity of demand for good X with respect to good Y. d. Would this change in budget constraint result in a movement along or shift in the demand curve for good X? Explain. d. Would this change in budget constraint result in a movement along or shift in the demand curve for good Y? Explain

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter6: Consumer Choices
Section: Chapter Questions
Problem 12RQ: Why does a change in income cause a parallel shift in the budget constraint?
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2. Assume Juanita's budget constraint is originally BC, with the price of good Y being $2. Then her budget constraint changes to BC. (Each box is 2 units) Quantity of Good Y 20 18 16 14 12 10 8 6 4 2 0 BC BC 0 2 4 6 8 10 12 14 16 18 20 Quantity of Good X a. What changed for the budget constraint to move from BC, to BC,? Be as specific as possible. (It is possible to provide what changes, in what direction and a dollar value.) b. Are goods X and Y complements or substitutes? Explain. c. Calculate the ARC cross-price elasticity of demand for good X with respect to good Y. d. Would this change in budget constraint result in a movement along or shift in the demand curve for good X? Explain. d. Would this change in budget constraint result in a movement along or shift in the demand curve for good Y? Explain
Transcribed Image Text:2. Assume Juanita's budget constraint is originally BC, with the price of good Y being $2. Then her budget constraint changes to BC. (Each box is 2 units) Quantity of Good Y 20 18 16 14 12 10 8 6 4 2 0 BC BC 0 2 4 6 8 10 12 14 16 18 20 Quantity of Good X a. What changed for the budget constraint to move from BC, to BC,? Be as specific as possible. (It is possible to provide what changes, in what direction and a dollar value.) b. Are goods X and Y complements or substitutes? Explain. c. Calculate the ARC cross-price elasticity of demand for good X with respect to good Y. d. Would this change in budget constraint result in a movement along or shift in the demand curve for good X? Explain. d. Would this change in budget constraint result in a movement along or shift in the demand curve for good Y? Explain
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