The diagram below illustrates Olive's optimal combination of calamari C0, and shrimp cocktail, S0, given the budget constraint B0. In addition the diagram illustrates the optimal combination of calamari and shrimp cocktail, C1 and S1, that would exist as a result of an increase in the price of calamari. On this diagram indicate:a. The income and substitution effects. (Also draw the hypothetical budget constraint Bh)b. What type of commodity is calamari? ShrimpCocktailS,S.LUbU.\B1C.\B»Calamari

when price of calamari increases there is a shift in the demand for calamari from OC0 to OC1, this…

Answered: Shrimp Cocktail S, S. LUb U. \B1 C. \B»…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 8PA

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The diagram below illustrates Olive's optimal combination of calamari C₀, and shrimp cocktail, S₀, given the budget constraint B₀. In addition the diagram illustrates the optimal combination of calamari and shrimp cocktail, C₁ and S_1,that would exist as a result of an increase in the price of calamari. On this diagram indicate:

a. The income and substitution effects. (Also draw the hypothetical budget constraint B_h)

b. What type of commodity is calamari?

Shrimp
Cocktail
S,
S.
LUb
U.
\B1
C.
\B»
Calamari

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