question archive Two indifference curves of a consumer and some possible budget lines are shown in the picture below: 42 15 (3,13
Two indifference curves of a consumer and some possible budget lines are shown in the picture below: 42 15 (3,13
Subject:BusinessPrice: Bought3
Two indifference curves of a consumer and some possible budget lines are shown in the picture below: 42 15 (3,13.2) (12,9) (5,7.5) (16,5.4) (10.5, 2.7) 41 10 15 18 25 a. Given that the income of the consumer is 75 TL, the price of good 1 is 3 TL/unit, and the price of good 2 is 5 TL/unit, what is optimal consump- tion of the consumer? b. If the price of good 1 increased to 7.50 TL/unit (income and price of good 2 does not change), how much would the consumption of good 1 change (given that the consumer always consumes the optimal bundle and any prices and income). How much of this change is due to income effect and how much of it is due to substitution effect?
