Chapter 21 Homework Answer Keys

Chapter 21 Homework Answer Keys - croissants and less...

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416 ) Chapter 21/The Theory of Consumer Choice Problems and Applications 1. a. Figure 10 shows the effect of the frost on Jennifer's budget constraint. Because the price of coffee rises, her budget constraint swivels from BC 1 to 2 . b. If the substitution effect outweighs the income effect for croissants, Jennifer buys more croissants and less coffee, as shown in Figure 10. She moves from point A to point B. Figure 10 c. If the income effect outweighs the substitution effect for croissants, Jennifer buys fewer
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Unformatted text preview: croissants and less coffee, moving from point A to point B in Figure 11. Figure 11 2. a. Skis and ski bindings are complements. Coke and Pepsi are substitutes. b. Indifference curves between Coke and Pepsi are fairly straight, because there is little to distinguish them, so they are nearly perfect substitutes. Indifference curves between skis and ski bindings are very bowed, because they are complements....
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