Distinguish between the substitution and income effect

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A) State and explain 5 factors that affect a consumer's demand schedule.

B) A consumer, D Carroll, spends all of his income on 2 goods X and Y. The 2 goods are both normal but are not complementary. The price of good X is reduced but the price of good Y is unchanged. The consumer continues to spend all of his income on the 2 goods. Distinguish between the Substitution Effect and the Income Effect of the price reduction in good X.

C) Explain 3 assumptions concerning consumer behaviour.

Reference no: EM13187981

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