Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 20, Problem 8E
To determine
(a)
Income elasticity and the reason because of which it is positive.
To determine
(b)
Changes in demand curve when income elasticity is 2.0 and 0.2.
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1. Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3
apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added
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Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3 apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added 5 units to Sadid's utility, while the last bread added 7 units. Is Riaz making the utility-maximizing choice? Why or why not? Do you suggest any adjustment in Riaz's consumption bundle? Why or why not? Give reasons in support of your answer.State the condition for a consumer's utility maximizing choice and illustrate graphically.
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