If the demand function face by the consumer for good X is given by X=15+MP-120 Where X = Quantity demanded, M = income and P = Price of product X. Assume his original income is Kshs. 3200 per month and price of good X has increased from Kshs. 10 per unit to Kshs. 20 per unit. Calculate the magnitude of total effect (TE), substitution effect (SE) and income effect (IE) resulting from this change in price.
If the demand function face by the consumer for good X is given by X=15+MP-120 Where X = Quantity demanded, M = income and P = Price of product X. Assume his original income is Kshs. 3200 per month and price of good X has increased from Kshs. 10 per unit to Kshs. 20 per unit. Calculate the magnitude of total effect (TE), substitution effect (SE) and income effect (IE) resulting from this change in price.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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If the demand function face by the consumer for good X is given by
X=15+MP-120
Where X = Quantity demanded, M = income and P =
Assume his original income is Kshs. 3200 per month and price of good X has increased from Kshs. 10 per unit to Kshs. 20 per unit. Calculate the magnitude of total effect (TE), substitution effect (SE) and income effect (IE) resulting from this change in price.
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