Assuming that the income effect is negligible

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Q. In the two-period model, Assume a household's income in the 1st period is $40,000, income in the second period is $50,000 also the real interest rate is 25 percent (%). Illustrate what is the household's maximum spending in the second period?

Q. Larry demands strawberries according to the schedule P=¤-(q/2), where P is the cost of strawberries also q the quantity. Assuming that the income effect is negligible, how much will he be hurt if the cost of strawberries goes from $1 a pint to $2 a pint?

Reference no: EM1321760

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