4) Assume Linda only buys two goods, chicken and rice with her income of M, and prices,Pc & PR.a) Graph her consumer choice model (with chicken on thex axis. Nowlet price of chickenfall, causing Linda to consume more chicken and more rice. Indicate the income andsubstitution effects on the graph.b) Based on your graph from part a, draw Linda’s ordinaly demand (do) and compensateddemand (dc) curves for chickenc) (True/False) this chicken must be a nomal good. Explain how you know.d) (True/False) this rice must be a nomal good. Explain how you know.

Two goods are considered in the market chicken and rice with price of chicken and rice denoted as Pc…

a) Graph her consumer choice model (with chicken onthe x axis. Nowlet price of chicl fall, causing Linda to consume more chicken and more rice. Indicate the income a substitution effects on the graph. Based on your graph from part a, draw Linda's ordinary demand (do) and compensated and (de) curves for chicken True/False) this chicken must be a nomal good. Explain how you know. True/False) this rice must be a nomal good. Explain how you know.

a) Graph her consumer choice model (with chicken onthe x axis. Nowlet price of chicl fall, causing Linda to consume more chicken and more rice. Indicate the income a substitution effects on the graph. Based on your graph from part a, draw Linda's ordinary demand (do) and compensated and (de) curves for chicken True/False) this chicken must be a nomal good. Explain how you know. True/False) this rice must be a nomal good. Explain how you know.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The following figure shows the indifference curves and two budget line of student Tuna whose choices are apple and banana. The Initial price of Banana is €4/kg, when budget line is B1. Initially Tuna was at equilibrium at point A. Answer the following questions according to the information given on the diagram. Show your calculations below. a. What is the weekly Income of Tuna? (). b. If Tuna's initial preference is at A how much Banana she consumes? (" c. If Price of Banana decreases to €3/kg and she moves to point B, how much Apple she will consume at B? (. d. If the demand curve for Banana will be derived by using the indifference curves on figure 1, what will be the Price and quantity coordinates of Point A and Point B on figure 2? Apples Price Bananas Quantity
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