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»…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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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