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Question 24 1 pts Tom gets $120 per week to spend on peanut butter and carrots in the fixed ratio of 1 pound of peanut butter to 4 pounds of carrots. Peanut butter costs $1 per pound and carrots cost $0.5 per pound. Suppose the price of carrots were to rise from $0.5 to $1 per pound. Is Tom's change in consumption due to income effect or substitution effect? both O income effect only substitution effect only O neither

Question 24 1 pts Tom gets $120 per week to spend on peanut butter and carrots in the fixed ratio of 1 pound of peanut butter to 4 pounds of carrots. Peanut butter costs $1 per pound and carrots cost $0.5 per pound. Suppose the price of carrots were to rise from $0.5 to $1 per pound. Is Tom's change in consumption due to income effect or substitution effect? both O income effect only substitution effect only O neither

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question 24 1 pts Tom gets $120 per week to spend on peanut butter and carrots in the fixed ratio of 1 pound of peanut butter to 4 pounds of carrots. Peanut butter costs $1 per pound and carrots cost $0.5 per pound. Suppose the price of carrots were to rise from $0.5 to $1 per pound. Is Tom's change in consumption due to income effect or substitution effect? both O income effect only substitution effect only O neither
Transcribed Image Text:Question 24 1 pts Tom gets $120 per week to spend on peanut butter and carrots in the fixed ratio of 1 pound of peanut butter to 4 pounds of carrots. Peanut butter costs $1 per pound and carrots cost $0.5 per pound. Suppose the price of carrots were to rise from $0.5 to $1 per pound. Is Tom's change in consumption due to income effect or substitution effect? both O income effect only substitution effect only O neither
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