4. Sompa consumes two goods (x and y) with a total income of GHS 20 and the price of the two goods are GHS 4.00 and GHS 5.00 for commodity X and Y respectively. a. Write down the equation of the budget line b. What is the slope of the budget line? c. How does the budget line change if the consumer income increases to GHS 40 but prices remain unchanged? d. What happens to the budget line if the price of good y decreases to 3 whiles the price of good x and income remain unchanged? e. What happens to the budget line if price of good x increases to 7 whiles the price of good x and income remain unchanged? f. How much of good x can Sompa consume if she spends her entire income on that good? g. How much of good y can Sompa consume if she spends her entire income on that good? 5. With the aid of a diagram analyse the income, substitution and total effect of a price change on the following type of goods. a. Normal goods b. Inferior goods c. Giffen goods
4. Sompa consumes two goods (x and y) with a total income of GHS 20 and the price of the
two goods are GHS 4.00 and GHS 5.00 for commodity X and Y respectively.
a. Write down the equation of the budget line
b. What is the slope of the budget line?
c. How does the budget line change if the consumer income increases to GHS 40 but
prices remain unchanged?
d. What happens to the budget line if the price of good y decreases to 3 whiles the price
of good x and income remain unchanged?
e. What happens to the budget line if price of good x increases to 7 whiles the price of
good x and income remain unchanged?
f. How much of good x can Sompa consume if she spends her entire income on that
good?
g. How much of good y can Sompa consume if she spends her entire income on that
good?
5. With the aid of a diagram analyse the income, substitution and total effect of a price change on
the following type of goods.
a. Normal goods
b. Inferior goods
c. Giffen goods
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