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Suppose that Jim uses his budget to purchase 100 units of Good X and 100 units of Good Y. When the price of Good X rises, he purchases 65 units of Good X and 95 units of Good Y. An economist calculates his compensated budget and finds that in that scenario, Jim would buy 80 units of Good X and 105 units of Good Y. Calculate the income effect. (Remember to include a negative sign (-) if the effect reduces the quantity.)

Suppose that Jim uses his budget to purchase 100 units of Good X and 100 units of Good Y. When the price of Good X rises, he purchases 65 units of Good X and 95 units of Good Y. An economist calculates his compensated budget and finds that in that scenario, Jim would buy 80 units of Good X and 105 units of Good Y. Calculate the income effect. (Remember to include a negative sign (-) if the effect reduces the quantity.)

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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Suppose that Jim uses his budget to purchase 100 units of Good X and 100 units of Good Y. When the price of Good X rises, he purchases 65 units of Good X and 95 units of Good Y. An economist calculates his compensated budget and finds that in that scenario, Jim would buy 80 units of Good X and 105 units of Good Y. Calculate the income effect. (Remember to include a negative sign (-) if the effect reduces the quantity.)
Transcribed Image Text:Suppose that Jim uses his budget to purchase 100 units of Good X and 100 units of Good Y. When the price of Good X rises, he purchases 65 units of Good X and 95 units of Good Y. An economist calculates his compensated budget and finds that in that scenario, Jim would buy 80 units of Good X and 105 units of Good Y. Calculate the income effect. (Remember to include a negative sign (-) if the effect reduces the quantity.)
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