The substitution effect of a price decrease for a good with a normal indifference curve pattern is graphed by? A. drawing a new budget line tangent to the indifference curve attained at the new price. B. drawing a new budget line tangent to the original indifference curve but at the slope of the new price of the good. C. drawing a new budget line parallel to the initial budget line but tangent to the indifferent curve attained at the new price. D. doing none of the above because the substitution effect cannot be graphed.
Marginal Rate of Technical Substitution
MRTS reaches a manufacturer when a part of the product is lowered to sustain the manufacturing level when the other part is extended. It is the level of the quantity that is lowered when one extra volume is used, and the output is unchanged.
Preferences and Utility Analysis
Before understanding what is preference and utility analysis, it is very important to understand the terms preference and utility separately.
1. The substitution effect of a
A. drawing a new budget line tangent to the indifference curve attained at the new price.
B. drawing a new budget line tangent to the original indifference curve but at the slope of the new price of the good.
C. drawing a new budget line parallel to the initial budget line but tangent to the indifferent curve attained at the new price.
D. doing none of the above because the substitution effect cannot be graphed.
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