{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter%204%20Practice%20A

# Chapter%204%20Practice%20A - Chapter 4 Practice A 1 Suppose...

This preview shows pages 1–2. Sign up to view the full content.

Chapter 4 Practice A 1. Suppose Jane has an income of \$40, the price of good X is \$4, and the price of good Y is \$4. She consumes a bundle that consists of 5 units of X and 5 units of Y each month. a. Now the price of X falls to \$2. Jane decides to consume 7 units of X and 6.5 units of Y. Does Jane feel richer? Why do you think so? (4 points) b. Can you tell whether good X is non-Giffen or Giffen for Jane? (4 points) c. To support your answer in part (b), construct Jane’s demand curve for X. Is the slope of the demand curve consistent with your answer in part (b)? (4 points) d. Can you tell whether good X is normal or inferior for Jane? (4 points) e. Now Jane finds that the fall in the price of X has increased her purchasing power, so she decides to share it with her brother by sending him \$12 each month for the rest of her life. Can she afford bundle A (what she had been consuming before the price and income changes)? (4 points) f. To maintain her utility level at U 1 after the price and income change, she decides to consume 8 units of X and 3 units of Y.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern