Answered: what happens if both masks and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A consumer has income of $15,000. Masks costs $35 per mask, and sanitizers costs $70 per bottle.

b.Suppose his income increases from $15,000 to $20,000. Illustrate what happens if both masks and sanitizers are normal goods. Illustrate what happens if a mask is an inferior good.

c.The price of masks rises from $35 to $40 per mask,while the price of sanitizers is unchanged.For a consumer with constant income of $15,000,show what happens to consumption of both goods(assume both goods are normal goods).Decompose the change into income and substitution effects.

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