Consider consumer that only purchases two goods

Assignment Help Business Economics

Reference no: EM13984128

Consider a consumer that only purchases two goods to maximize his/her satisfaction. He/she originally maximized his/her satisfaction, and suddenly his/her income decreased. Assume that good 1 is inferior and good 2 is normal. What are the implications? Please explain diagrammatically and intuitively.

Reference no: EM13984128

Questions Cloud

Policy makers were the sole cause of the crisis : The FCIC fails to link unethical behavior of borrowers and lenders to the causes of the financial crisis of 2007-2008. The FCIC insists that the behavior of regulators and policy makers were the sole cause of the crisis.

Explain how the aggregate expenditure function shifts : Explain how the aggregate expenditure function shifts in response to changes in each of the following variables:

Refers to the securitization transaction : The following question refers to the securitization transaction “CMLTI 2006-NC2” which is discussed in the FCIC report and in the FCIC resource library. Losses of principal from defaults on the underlying mortgage pool are allocated first to the “A” ..

Explain the shapes of indifference curves that reflect : Draw and explain the shapes of indifference curves that reflect the following preferences.

Consider consumer that only purchases two goods : Consider a consumer that only purchases two goods to maximize his/her satisfaction. He/she originally maximized his/her satisfaction, and suddenly his/her income decreased. Assume that good 1 is inferior and good 2 is normal. What are the implication..

Explain income effect-substitution effect and total effect : Consumers only consume Diet Coke and Potato Chips. Using indifference curves and budget constraints, graphically and intuitively explain what will happen to consumer’s optimal consumption bundle if there has been an increase in the price of Potato Ch..

What is the structural adjustment program : What is the SAP (structural adjustment program)? What are the IMF-imposed "conditionalities"? Win did the IMF and World Bank imposed them upon Third World countries during both their debt crises and financial crises?

What is the bretton woods system : What is the Bretton Woods system? Why was it created and why did it collapse? How has this collapse ushered in more volatile exchange rate and frequent financial crises?

Identify the consequences of a strong dollar : Can you identify the consequences of a strong dollar or a weak dollar in the United States? Which direction do you prefer for the overall health of the American economy should the U.S. take measure to ensure that the dollar retains its dominant role ..

User Account

All Pages