Suppose a consumer in a competitive market maximises utility subject to a standard budget constraint. a. Given their resulting demand function, what assumptions would be required for one to conclude that when the price of good 1 goes up the consumer buys less of that good? b. Given their resulting demand function, what assumptions would be required for us to conclude that when the price of good 1 goes up the consumer buys more of good 2?
Suppose a consumer in a competitive market maximises utility subject to a standard budget constraint. a. Given their resulting demand function, what assumptions would be required for one to conclude that when the price of good 1 goes up the consumer buys less of that good? b. Given their resulting demand function, what assumptions would be required for us to conclude that when the price of good 1 goes up the consumer buys more of good 2?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Suppose a consumer in a competitive market maximises utility subject to a standard
budget constraint.
a. Given their resulting
b. Given their resulting demand function, what assumptions would be required for
us to conclude that when the price of good 1 goes up the consumer buys more
of good 2?
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