The graph shows Esther's best affordable point at A. The price of seeing a movie rises and Esther's new best affordable point is C. Draw a budget line that isolates the substitution effect. Label it B₂. Draw a point to indicate where Esther consumes if she faces the budget line you've drawn. Label it B. For Esther, the substitution effect is the movement from point income effect is the movement from point OA. A to point B; B to point C OB. A to point C, C to point B OC. B to point C; C to point A OD. C to point B, B to point A and the 8.0 6.0 4.0 2.0- 0.0- 0.0 2.0 C A B₂ 4.0 Maine Inar month) 6.0 1/2₂ B₁ 8.0
The graph shows Esther's best affordable point at A. The price of seeing a movie rises and Esther's new best affordable point is C. Draw a budget line that isolates the substitution effect. Label it B₂. Draw a point to indicate where Esther consumes if she faces the budget line you've drawn. Label it B. For Esther, the substitution effect is the movement from point income effect is the movement from point OA. A to point B; B to point C OB. A to point C, C to point B OC. B to point C; C to point A OD. C to point B, B to point A and the 8.0 6.0 4.0 2.0- 0.0- 0.0 2.0 C A B₂ 4.0 Maine Inar month) 6.0 1/2₂ B₁ 8.0
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please explain where exactly to put the line and how to approach the question.
Transcribed Image Text:The graph shows Esther's best affordable point at A.
The price of seeing a movie rises and Esther's new best affordable point is C.
Draw a budget line that isolates the substitution effect. Label it B₂.
Draw a point to indicate where Esther consumes if she faces the budget line
you've drawn. Label it B.
For Esther, the substitution effect is the movement from point
income effect is the movement from point
OA. A to point B; B to point C
OB. A to point C; C to point B
OC. B to point C; C to point A
OD. C to point B, B to point A
and the
8.0
6.0
4.0
2.0-
0.04
To
0.0
2.0
C
A
B₂
4.0
Movine /nor month
6.0
12
N
B₁
8.0
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