Nicanor's passion is good wine. If the prices of the other goods are constant, Nicanor's demand for a good Rioja is c = 0.04m – 2p where m is his income, p is the price of Rioja and c is the demand for Rioja bottles. Assume that Nicanor has an income of $10,000 and that the price of a decent bottle of Rioja is $50. If the price of Rioja rises to $60, determine the income effect and the substitution effect on the demand for bottles of Nicanor wine.
Nicanor's passion is good wine. If the prices of the other goods are constant, Nicanor's demand for a good Rioja is c = 0.04m – 2p where m is his income, p is the price of Rioja and c is the demand for Rioja bottles. Assume that Nicanor has an income of $10,000 and that the price of a decent bottle of Rioja is $50. If the price of Rioja rises to $60, determine the income effect and the substitution effect on the demand for bottles of Nicanor wine.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 21SQ
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![Nicanor's passion is good wine. If the prices of the other goods are constant, Nicanor's demand for a good Rioja is c = 0.04m – 2p,
where m is his income, p is the price of Rioja and c is the demand for Rioja bottles. Assume that Nicanor has an income of $10,000 and
that the price of a decent bottle of Rioja is $50. If the price of Rioja rises to $60, determine the income effect and the substitution effect
on the demand for bottles of Nicanor wine.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd6b22c2c-c7a3-402b-9b9c-b744049a1c82%2Fd63cb9d7-69c8-4a94-b340-b2d0f71e06cc%2Fuvz2fig_processed.png&w=3840&q=75)
Transcribed Image Text:Nicanor's passion is good wine. If the prices of the other goods are constant, Nicanor's demand for a good Rioja is c = 0.04m – 2p,
where m is his income, p is the price of Rioja and c is the demand for Rioja bottles. Assume that Nicanor has an income of $10,000 and
that the price of a decent bottle of Rioja is $50. If the price of Rioja rises to $60, determine the income effect and the substitution effect
on the demand for bottles of Nicanor wine.
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