ch82 - ch8 Multiple Choice Identify the choice that best...

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ch8 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Charlie’s utility function is x A x B . The price of apples used to be $1 per unit, and the price of bananas $2 per unit. His income was $40 per day. If the price of apples increased to $2.25 and the price of bananas fell to $1.75, then in order to be able to just afford his old bundle, Charlie would have to have a daily income of a. $62.50. b. $126. c. $31.25. d. $93.75. e. $250. ____ 2. Goods 1 and 2 are perfect complements, and a consumer always consumes them in the ratio of 2 units of good 2 per unit of good 1. If a consumer has an income of $720 and if the price of good 2 changes from $8 to $9, while the price of good 1 stays at $1, then the income effect of the price change a. is 9 times as strong as the substitution effect. b. does not change demand for good 1. c. accounts for the entire change in demand. d.
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This note was uploaded on 05/08/2011 for the course ECON 302 taught by Professor Avrin-rad during the Spring '09 term at University of Illinois, Urbana Champaign.

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ch82 - ch8 Multiple Choice Identify the choice that best...

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