Practice Quiz5

Principles of Macroeconomics

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Econ 101: Principles of Microeconomics NAME: Korinna K. Hansen Disc. Section: Practice Quiz 5 You need one large, clear graph for this quiz, and no long sentences. Betty spends all her income, I, in goods x and y, and good x is an inferior good for Betty. If the price of good x is P x1 , and the price of good y is Py, show in a budget constraint / indifference curve graph the original equilibrium for Betty and mark it as E
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Unformatted text preview: 1 . Make sure that you also mark all the intercepts in your graph. Now assume that the price of good x decreases to P x2 and everything else stays the same. Show the new equilibrium E 2 in your graph and again mark all intercepts. If x is an inferior good for Betty, show and mark clearly the price effect, substitution effect and income effect in your graph after this price change....
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This homework help was uploaded on 02/01/2008 for the course ECON 101 taught by Professor Hansen during the Spring '07 term at Wisconsin.

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