Suppose there are two goods - X and Y

Question # 00608439 Posted By: dr.tony Updated on: 10/27/2017 01:41 PM Due on: 10/27/2017
Subject Economics Topic Microeconomics Tutorials:
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  1. Suppose there are two goods: X and Y. Both goods are normal.

a) Show the income and substitution effects of a decrease in the price of good Y. Label the vertical axis Good X and label the horizontal axis Good Y.

b)Explain how total effect of the decrease in price of good Y is divided into the income and substitution effects in graph (a).

c) Below graph (a), draw the corresponding demand curve for good Y. Label the vertical axis the Price of Good Y and Label the horizontal axis Good Y.

d) Explain the demand curve in graph (c).

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  1. Tutorial # 00606970 Posted By: dr.tony Posted on: 10/27/2017 01:41 PM
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