Economics2a-c answer ++++ratingA consumer is initially at point A on her originalbudget constraint (the thin solid line with theXintercept and Y-intercept labeled). Sheexperiences a change in her budget constraint andis now at point B. Her new budget constraint isshown by the dotted line.C2[(Y1 + Aj)(1+r) +Y2]/PzU2[Y, + A, + (Y2/(1+r))]/PelC,a. What appears to have been the cause of thechange in her budget constraint?b. Is the substitution effect positive or negative?Show this effect(draw an arrow on the graph).c. Is the income effect positive or negative?Show this effect(draw an arrow on the graph).

Budget (B) constraint (C) is the quantity (Q) of the goods that the consumer (c) can purchase with…

Economics 2a-c answer ++++rating A consumer is initially at point A on her original budget constraint (the thin solid line with the Xintercept and Y-intercept labeled). She experiences a change in her budget constraint and is now at point B. Her new budget constraint is shown by the dotted line. [(Y₁ + A₁)(1+1) + Y2]/Pc2 U₂ U₁ [Y₁ + A₁ + (Y₂/(1+r))]/Pel C1BC1C1a C₁ a. What appears to have been the cause of the change in her budget constraint? b. Is the substitution effect positive or negative? (draw an arrow on the graph). Show this effect c. Is the income effect positive or negative? (draw an arrow on the graph). Show this effect

Economics 2a-c answer ++++rating A consumer is initially at point A on her original budget constraint (the thin solid line with the Xintercept and Y-intercept labeled). She experiences a change in her budget constraint and is now at point B. Her new budget constraint is shown by the dotted line. [(Y₁ + A₁)(1+1) + Y2]/Pc2 U₂ U₁ [Y₁ + A₁ + (Y₂/(1+r))]/Pel C1BC1C1a C₁ a. What appears to have been the cause of the change in her budget constraint? b. Is the substitution effect positive or negative? (draw an arrow on the graph). Show this effect c. Is the income effect positive or negative? (draw an arrow on the graph). Show this effect

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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