Assume that x1, x2 are ordinary goods. X₁ is an inferior good and x2 is a normal good. Draw a diagram of Slutsky decomposition of a price decrease. The rotation/shifts of the budget line • The optimal bundle before the price change (A) • The optimal bundle after accounting for only the substitution effect (B) • The optimal bundle after accounting for also the ordinary income effect (C), • The optimal bundle after accounting for the endowment income effect (D) Skip the indifference curves.

Assume that x1, x2 are ordinary goods. X₁ is an inferior good and x2 is a normal good. Draw a diagram of Slutsky decomposition of a price decrease. The rotation/shifts of the budget line • The optimal bundle before the price change (A) • The optimal bundle after accounting for only the substitution effect (B) • The optimal bundle after accounting for also the ordinary income effect (C), • The optimal bundle after accounting for the endowment income effect (D) Skip the indifference curves.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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