ECON_W3211_PS4

ECON_W3211_PS4 - (b Suppose the price for red pencils is decreased to $4 per a piece Does the change in her consumption reflect a substitution or

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON W3211.002 Intermediate Microeconomics Problem Set 4 Due Monday, October 11, 2010 1. Perloff, Chapter 5: 30, 34, 36 2. Suppose blue pencils and red pencils are perfect substitute for Jessie. Red pencils cost $10 per a piece, and blue pencils cost $5 per a piece, and Jessie’s income is $100. (a) What is Jessie’s optimal consumption bundle? Illustrate your answers in a graph.
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: (b) Suppose the price for red pencils is decreased to $4 per a piece. Does the change in her consumption reflect a substitution or an income effect? (c) Suppose the price for red pencils are the same as before, i.e. $10, but the price for blue pencils is decreased to $4 per a piece. Does this change in her consumption reflect a substitution or an income effect? 1...
View Full Document

This note was uploaded on 10/03/2011 for the course ECON W3211 taught by Professor Elmes during the Fall '09 term at Columbia.

Ask a homework question - tutors are online